Conversational commerce “C-Commerce” is a fast growing industry, utilising emergent artificial intelligence technology. What exactly is it and what are the implications for business and government. I will try to address these questions in this guide.
E-Commerce, M-Commerce … C-Commerce
It all started with the e-commerce revolution. Consumers could place online orders using their computers. Smartphones and tablets emerged, and the industry adapted. Websites were optimised for Smartphones and other mobile devices. M-Commerce was born.
Mobile instant messaging platforms such as WhatsApp emerged and yet again the industry is adapting. Businesses are now selling over WhatsApp and other messaging platforms. We call this phenomenon C-Commerce or Conversational Commerce What’s the appeal? Firstly the messaging platforms are so prevalent. WhatsApp alone has over 2 billion monthly active users. Businesses want to be where their customers are.
Messaging platforms also allow businesses to treat customers as individuals. Every customer is different and every conversation is personal. Contrast this to a typical e-commerse site which looks and behaves the same way for every visitor. For most businesses, employing agents to chat with customers isn’t economically viable. This is where artificial intelligence comes into play. Artificial Intelligence replaces human agents. Systems (“bots”) chat to customers to understand their needs, offer advice and recommend products. Find a quick guide to AI at the end of this article.
The market is large and growing quickly. Consumer retail spend via chatbots is forecast to hit $142bn USD by 2024, up from just $2.8bn in 2019.
Major players in the sector
Facebook is investing heavily in the C-Commerce space, through their WhatsApp Business API and Messenger Platform. The tech giants all have chatbot offerings, notably Google Dialogflow, Amazon Lex and the Microsoft Bot framework. However, as explained below, a chatbot is not in itself a C-Commerce platform. Unlike these offerings our own C-Commerce platform is not a chatbot. It’s a C-Commerce platform built specifically for online retailers.
One of the first adopters of conversational commerce was the US based florist 1-800-FLOWERS.COM back in 2016. 1-800-FLOWERS offer their customers a concierge service over the major chat platforms. The company’s CEO, Chris McCann describes conversational commerce as the “fifth wave” of retail, and the company continues to invest in this emergent technology today.
Implications for business
Large businesses are already starting to invest in C-Commerce. Messaging platforms, notably Facebook, are developing API’s or “gateways” which allow merchants to automate conversations with their customers. Some businesses stand to gain, and some will lose:
The high street - High street retailers are already struggling to compete with online merchants. AI powered conversational commerce allows online retailers to offer personal help and advice to every customer. We recently spoke to 3 large clothing retailers about their plans. All three said they plan to close retail outlets but invest in AI.
SMEs - Many small businesses are able to compete with large merchants by offering personal service. The emergence of AI powered C-Commerce will close the gap. AI will never be a match for human interaction. However, the ability to offer a personal service, 24/7 will threaten the smaller players.
Implications for government
Employment - C-Commerce is further exacerbating the trend away from the high street, traditionally a large employer. Artificial Intelligence presents tremendous opportunities, but from an employment perspective it means small numbers of very high skill, highly paid jobs. Such jobs are unlikely to be created in deprived areas of the country.
Regulation and guidance - Artificial Intelligence is all about self learning computer systems. Systems capable of making decisions that were not explicitly programmed into the system. To date, the legislation and regulations relating to discrimination assume humans are the “problem”. HR policies have been carefully drafted to ensure employees do not discriminate on the grounds of race, gender, sexual orientation etc. No such guidance currently exists for AI computer systems.
Tax residency - Relocating employees from one jurisdiction to another is a complex and costly process. In contrast, moving computer systems is easy. It is quite feasible for a national retailer to move their entire operation overseas, leaving only the distribution element of the business in place. Under current rules, distribution alone does not constitute a taxable presence.
A quick quide to Artificial Intelligence
Artificial intelligence is a system's ability to "generalise" or learn by itself.
Natural language processing
Understanding human speech (or chat) is a domain of AI known as Natural Language Processing (NLP) or Natural Language Understanding (NLU). It’s critical to the success of C-Commerce platforms as the programmers don’t know exactly what customers will say. The system needs to learn and understand how sentences are formed.
A customer can show a sales assistant a dress and say “something like this but in black”. If a computer system can learn to “see” things the way a human does, it can behave like a human. “Seeing” is a field of artificial intelligence known as Computer Vision (CV).
What is a Chatbot? how do chatbots relate to C-Commerce?
A Chatbot is simply a system which “chats” to humans, trying to behave like a human itself. A chatbot is an integral part of a C-Commerce solution, but not all chatbots are used for sales. Today most chatbots are used for customer service type queries. Customer service chatbots are embedded on websites. In contrast, C-Commerce chatbots are typically omni-channel - working over the Web, WhatsApp, Facebook Messenger etc. Read more on Wikipedia
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C-Commerce Market size - 35 billion USD (2020 - Cap Gemini)
C-Commerce Growth rate - 30% CAGR (2019-2024 - Business Insider)
Consumer retail spend via chatbots - $142 billion USD (2024 Forecast - Business Insider)
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