The Changing Face of Retail: Chatbot or Human? The Future is AI

Believe it or not, chatbots have been around since the 1960s. In 1966, Joseph Weizenbaum at MIT created one of the first chatbots, ELIZA, which simulated conversation by using pattern matching to identify keywords and provide pre-set responses. It gave the illusion of understanding, by rephrasing parts of a user's input. While primitive by today's standards, ELIZA demonstrated the potential for computers to engage in conversations.

In just a few decades, chatbots have become a major part of many retailers’ toolkits. Today’s modern chatbots use artificial intelligence and natural language processing to be able to answer even complex customer queries. Instead of being deterred at the prospect of speaking to a robot (some early chatbot experiences were far from seamless), research from Capterra has found that today, over half of online shoppers using chatbots are more likely to shop from brands using conversational AI. ⁽¹⁾

While the use of chatbots has only really taken off in the last five years, today, many marketing solution providers and retail CRM tools offer chatbot functions to their customers, to not only automate simple queries, but also to improve efficiencies and capture customer data more effectively. Retailers around the world are starting to understand the benefits of using chatbots and the time, efficiency and staff cost savings they can enjoy if they deploy chatbot technology well.

The Use of Chatbots in Retail

Some of the first retailers to experiment with chatbots were Domino's Pizza and Sephora, who both launched Facebook Messenger chatbots in 2016. These provided basic automated customer service functions like checking orders or product recommendations.

2017-2018 saw more major retailers implementing chatbots, including H&M and The North Face. Capabilities expanded beyond social media bots, to AI-powered chatbots on websites and apps.

By 2021, over 50% of retailers had adopted some form of chatbot technology. Today, mainstream use cases now include giving personal recommendations, customer service, conversational e-commerce and interactive shopping assistants.

Today’s chatbots are capable of sentiment analysis (using Neuro Linguistic Processing), to identify positive, negative or neutral moods, to be able to gauge customer satisfaction. They can understand customer intent, to easily route questions on topics such as ordering, refunds and recommendations, and identify product names, brands and part numbers.

Perhaps the biggest evolutions have been in ‘conversational commerce’ – chatbots can now understand product queries, recommend purchases and complete orders conversationally. They can use customer data and past chat history to give tailored solutions and product suggestions and operate in multiple languages to assist customers from anywhere in the world, across multiple devices.

For online, virtual and metaverse shoppers, chatbots are going to play a major role in their customer experience.

Analysts Grand View Research projected the global chatbot market is expected to grow at a compound annual growth rate of 23.3.% from 2023 to 2030 and to reach USD 27,297.2 million by 2030. ⁽²⁾ Retailers seem driven to continue the quest for more immersive, intelligent chatbot experiences.

The Pros of Chatbots for Customer Service:

24/7 availability: Chatbots offer constant, round the clock availability. This improves customer experience with quick, convenient access to information.
A global language: Chatbots aren’t limited to one or two languages, like many customer service agents. They can converse in real time in hundreds of different langauges to serve a global customer base.
Reduced costs: Chatbots automate simple repetitive tasks, saving on customer service staffing costs. One retailer saw a 70% decrease in call volume after implementing a chatbot. ⁽³⁾
Faster response times: Chatbots provide instant responses, often averaging under a minute per enquiry. For common questions, chatbots can deliver answers much faster (38% faster, on average) ⁽³⁾than customers can get from waiting in phone queues.
Increased data collection: Chatbot conversations generate valuable data on customer questions and needs. Analysing this data provides retailers with valuable insights, to be able to improve products and services.
Scalability: It's easy to scale chatbots to handle higher volumes during peak periods. This avoids long wait times for understaffed human teams.

The Cons of Chatbots for Customer Service:

Robotic responses: The major issue that customers complain about with chatbots is that they are too scripted, or that their repetitive responses annoy customers. Without human nuance, chatbot conversations can feel synthetic.
Limitations with complex issues: Chatbots still struggle with contextual nuance and uncommon queries. Customers get frustrated when chatbots fail to understand them.
Privacy concerns: Customers may be uncomfortable sharing sensitive data with an automated bot. Ethical use of customer data also raises concerns.
Perception issues: Some customers prefer talking to a human. 21% said they dislike chatbots due to inaccuracies and lack of empathy. ⁽⁴⁾Customer grievances or stressful situations can be exacerbated when handled by an inhuman tool that is incapable of empathy and understanding.
Implementation costs: Developing intelligent chatbots requires substantial investment. Ongoing maintenance and updates also carry costs.

The Future is Automated

While there is inevitably more work to be done to ensure that the customer experience of using chatbots becomes far closer to the experience of speaking to a real person, they are here to stay. In fact, Juniper Research predicts that they will drive $72 bn worth of sales by 2028 ⁽⁵⁾ and save $11.5bn in customer service costs at the same time. ⁽⁶⁾

From retail banking to homewares, chatbots are an automated tool that, when configured using human intelligence to model behaviours, dialogue and experience, can give customers a round-the-clock service and added value to their retail experience. For retailers, vital data is collected, playing a pivotal part in generating insights for future enhanced CX and personalisation to ultimately deliver a more bespoke service.

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The Changing Face of Retail: Chatbot or Human? The Future is AI

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