June 5, 2023 | Blog | 6 minutes

The ‘What’, ‘Why’, and ‘How’ of Conversational AI in Retail

Seema Karwa

Head of Sales

Retail therapy is one of the best mood enhancers for me. Two of my favorite brands to shop from are Zara and Marks & Spencer. The assisted shopping experience I get in these stores is very good. While I try to search for a particular size or color of a garment, a Zara sales store manager would check on his phone if it is available in his store or any other store in the city, and if they can courier it to me if not available in their store. As a consumer, I find this to be a great experience. However, shopping behavior has permanently changed over the years, especially in the post-COVID era. As the world grapples with the impact of the COVID-19 pandemic, consumer behavior has shifted drastically from offline to online channels. Traditional retailers are now faced with the challenge of meeting evolving customer expectations in this rapidly changing landscape. As per a Mckinsey report on tech transformation in retail, in Germany alone, online sales experienced a staggering annual growth rate of 23.0 percent from 2019 to 2020, while offline sales only saw a modest increase of 3.6 percent each year. Retailers need to set a North Star to guide their aspirations for customer experience. In-person store engagement has shifted to online engagement, and that's where Conversational AI is the new perfect shopping assistant. So, what is conversational AI?

Conversational AI refers to the use of artificial intelligence-powered virtual assistants, chatbots, and voice assistants to facilitate natural language interactions with customers. These intelligent systems are capable of understanding and responding to customer queries, providing personalized recommendations, and even processing transactions, all in a conversational manner. Now that we know what conversational AI is, let's try to understand why it has become a nearly perfect shopping assistant.

24/7 Accessible

In the new digital world, geography is no longer a limitation for retailers. Retailers need to have the ability to field customer queries across time zones 24/7 and act upon the queries instantly. That's where Conversational AI chatbots come into play. These online shopping bots are around-the-clock self-service tools, allowing customers to reach out to retailers and resolve their queries anytime and anywhere. Chatbots for the retail industry enable a smooth conversational flow during the customer journey all the time, without having to wait for an agent to respond or be restricted by "working hours." Retail chatbots are not only capable of serving 24/7 but are also significantly cheaper than onboarding more agents with rotational shifts.

Time & Money Saver

Implementing a conversational AI chatbot can quickly help with common tasks such as ticket labeling, routing, and answering frequently asked questions. Automating ticket routing can be especially helpful in avoiding delays for support teams. With the help of AI, companies can train models to label and route customer inquiries based on past data, freeing up valuable time for agents to focus on higher-level customer issues. If the customer support query is complex or beyond the scope of the retail chatbot, there is a seamless process to hand off the query to a live agent based on their skill sets and current workload. This enables a smooth, hassle-free customer experience for the support teams in the retail industry.

When support teams are equipped with effective AI tools, they feel empowered to provide better customer service, resulting in high levels of customer satisfaction and a positive customer experience. Additionally, this creates a positive work environment for support agents who feel supported and valued in their day-to-day activities.

Improves In-Store Experience

Conversational AI can automate in-store operations and reduce a substantial amount of operational expenses in retail stores. It can help sales personnel assist customers in the store, reduce queues through contactless payment methods, replenish stock by real-time stock monitoring, and overall improve the in-store experience for customers.

Personalized Customer Experience & Making Informed Business Decisions Based on Data

Conversational AI is also capable of detecting the mood, intent, and interest of your customers throughout the purchase journey. Some global retail brands have even introduced a facial recognition system for this function installed at checkout lanes. If a customer is annoyed, a store representative will immediately talk to him or her. Retail chatbots also leverage the intent prediction feature to understand customers' tone, context, and behavior. It helps retailers build stronger relationships with customers by providing personalized assistance throughout the conversational flow. With AI, retailers can also predict customer choices by analyzing various data points such as demographics, location, social media comments, and reviews. This personalized approach to retail shopping can help increase both online and offline sales and improve the overall customer experience.

Kmart Australia, for example, has developed an AI-powered digital assistant called Kbot that integrates with the augmented reality (AR) functionality on its website. It lets customers interact with products such as furniture and see what they will look like in their homes. Once they have found a product they're interested in, they can use voice to ask questions about the product, such as where it's in stock and when it can be delivered.

Also, with all the data being collected around customers, businesses can gain insights into customer needs and identify areas of improvement, which further helps in supporting businesses to make informed decisions.

Now, let's move to how retail businesses are leveraging Conversational AI.

Companies leverage conversational AI in retail in several ways to enhance customer experiences and drive business growth. Here are some common ways companies utilize conversational AI:

  • Chatbots and Virtual Assistants: AI-powered bots provide instant support, answer FAQs, assist with recommendations, and handle customer inquiries across various platforms.
  • Personalized Recommendations: Conversational AI analyzes customer data and browsing history to deliver tailored product recommendations, increasing conversions and satisfaction.
  • Order Management and Tracking: Conversational AI streamlines the ordering process, enables real-time shipment tracking, and facilitates returns for seamless customer experiences.
  • Natural Language Processing: AI's natural language processing capabilities enhance understanding and enable accurate and context-aware responses to customer inquiries.
  • Voice-Enabled Commerce: Integration with smart speakers and voice assistants allows customers to search, order, and receive personalized recommendations using voice commands.
  • Data Analysis and Insights: Conversational AI collects customer interaction data, providing valuable insights for optimizing offerings, improving service, and making data-driven decisions.

We recognize the profound impact conversational AI is having on the retail landscape and stand ready to assist retailers in harnessing the power of conversational AI, enabling them to thrive in a dynamic and customer-centric market.

Ready to enhance your retail business with Conversational AI? Contact us now to explore how our AI-powered solutions can revolutionize your customer experience and drive business growth. Don't miss out on the opportunity to thrive in the dynamic and customer-centric market. Get in touch with us today!