Conversational commerce – the fast-evolving technological field of voice assistants, AI (artificial intelligence) and messenger apps – has the potential to revolutionise the relationship between brands and consumers, according to new research.

In a post-pandemic world where consumers increasingly expect to have an interactive dialogue with brands, including the opportunity to purchase, conversational commerce is set to be hugely significant for brands, retailers and foodservice operators, says GlobalData’s thematic research paper on Conversational Commerce in FMCG. Conversational commerce makes use of what GlobalData has dubbed ‘conversational platforms’ – technologies that deploy computer analysis of the human voice to enable machines to understand human language, responding to requests and demands in increasingly sophisticated ways.

“Recent advances in speech recognition and natural language processing have improved the experience of talking to a computer,” the report explains. “Smart speakers like Amazon Echo and Google Home have brought voice-enabled interaction into the home.”

Thanks in part to Amazon’s decision to open-source its Alexa platform for developers and device makers, these ‘assistants’ are now being deployed in a number of products, adding another element to the journey that businesses have to factor into their relationship with the end consumer.

As the technology evolves, the report splits its development into three increasingly sophisticated types of AI-enabled platform:

  • Assistants: Encompassing voice control, searches, dialling or dictated transcription. Assistants recognise intent and respond with answers or actions, but are regarded as a ‘dead end’ in innovation terms for true conversational commerce.
  • Advisors: With a more advanced awareness of user intent, advisors can make specific recommendations in areas such as shopping and lifestyle/health & wellness advice. They can also send alerts based on learnt and analysed preferences and routines – meeting reminders, traffic conditions on a commute, and so on.
  • Agents: The highest form of AI, agents act as an intermediary between the user and a wide range of online services, learning details such as preferred vendors, payment options and scheduling, then using them while not compromising privacy or security.

These distinct tiers of AI can serve as a roadmap for future investment, research and implementation, the report suggests. Conversational platforms with commercial goals, for example, will be best served by the two upper tiers – Advisors and Agents – which have the potential to personalise the interaction with consumers, thanks to their greater ability to understand – or learn from – their users.

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By GlobalData

However, there are challenges: most notably, the need to keep consumers engaged with AI tools in the longer term, so that they incorporate them into their online behaviour, including shopping. There is also the need to allay concerns about ‘always on’ monitoring of consumer behaviour and irritation with frequent notifications and predictive marketing.

While there are clear opportunities for FMCG brand owners and retailers to build brands and increase sales within the conversational commerce sphere, they will also need to integrate these tools successfully within their broader businesses, GlobalData points out. By their nature, these technologies can be useful for all brands, no matter what their scale, the report adds.

“This will not just be the preserve of the biggest brands. Indeed, small, local businesses may succeed in the more effective use of conversational commerce than multinational names. Success will be dependent on an effective understanding of the technology’s capabilities, its relationship to a particular branded offering, who its target consumers are and whether it can deliver an easy, quick and intelligent user experience.”

Messaging platforms are increasingly being adapted to enable brand-to-consumer communication and commercial transactions. WeChat in China, which has more than 1bn active users, is perhaps the most famous example of this in operation today.

As the report points out: “When considering conversational platforms as e-commerce tools, WeChat has bucked the common Western/US trend of unbundled, case-specific apps, offering a single solution that allows the consumer to perform a vast range of tasks, including online ordering and purchasing.”

WeChat boasts a number of add-ons, such as a mobile wallet and chat-based transactional and interactive widgets, the report says. “All of this allows it to act as an interface between consumers and a massive range of businesses across China, from local, small vendors through to international, aspirational power brands, like Nike.”

Such is its power that some small businesses are eschewing developing their own websites or apps, preferring to build a presence on WeChat instead, which also offers them the chance to ‘friend’ consumers, thereby reversing the typical online relationship. This kind of interaction offers great potential for brands whose consumers value personalisation in their relationship: Product attributes can be tailored to the precise demands of the consumer, offering them a bespoke service, which could be particularly applicable to the luxury end of the market.

But, AI could also be very useful at a business level, the report notes, highlighting that one of the key beneficiaries of the evolving technology could be businesses with complex supply chains: “Conversational platforms can be leveraged for more effective business-to-business (B2B) communications, with AI elements also learning and increasing operational efficiencies.”

AI-enabled apps, messaging and assistants are now key marketing tools in an era when consumers engage in more real-time online interaction than ever before – a development accelerated by COVID-19 lockdowns.

“Conversational apps are undergoing an evolutionary phase, aided by the advancement of AI into more natural language skills, and the ability to detect sentiment and nuance in consumers’ communications,” the report says.

“This is taking place in combination with the incorporation of transactional elements into conversational apps that offer the ability to build two-way consumer-brand relationships that can be converted into completed sales – all within an agile, simple and mobile platform.”

Click here for further details on GlobalData’s Conversational Commerce in FMCG – Thematic Research