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Is The West Ready For Chat Commerce?

While conversational commerce has taken off in China, the West has yet to fully grasp its potential. Should all luxury brands and retailers be leveraging this opportunity?

In an era dominated by digital communication, the way consumers interact with brands and retailers is constantly evolving. In China, in particular, a growing demand for personalised user experiences has given rise to conversational commerce – the intersection between shopping and instant messaging or social media apps.

According to a white paper released in September 2018 by research and communications agency Lewis, 58 percent of Chinese consumers opt to communicate with brands using social channels like WeChat, QQ and Alitalk, while preferences for face-to-face, phone or email interactions are declining.

So what does this shifting consumer pattern mean for the fashion sector? Thomas Graziani, co-founder of WalktheChat – a platform helping foreign businesses sell within China’s complex market using local apps like WeChat – suggests that strengthening customer service strategies via social networks can build loyalty and stronger relationships: “Brands adopting social communication have an outstanding ability to be visible to the end user, and engage with them on a more personal basis.”

Gucci WeChat Mini-program

Yet traditional customer service tactics pose challenges such as high training and labour costs, and the incapacity to serve mass consumer feedback. In recent years, the emergence of AI chatbot technology has provided an all-in-one solution, offering round-the-clock automated customer support services and scalability for peak demand. Additionally, its intelligent learning capabilities and predictive analytics can improve the consumer journey by prompting shopping decisions according to individual needs and requirements.

China’s retail sector is already witnessing the benefits of chatbot integration: Lewis reports that 75 percent of merchants currently use chatbots to some degree and will continue to use the technology to promote their products. By 2020, a staggering 85 percent of all brand to consumer interactions will likely no longer involve humans. Unsurprisingly, the country’s largest tech giant, Alibaba, is on board, launching its own AI chatbot AliMe in 2017 to service its hugely successful multi-label e-commerce platforms, Taobao and Tmall.

“Brands adopting social communication have an outstanding ability to be visible to the end user.”

Thomas Graziani

China is tapping chat commerce in other ways too. Its leading messaging service WeChat has evolved into a multipurpose ecosystem: in January 2017 it launched Mini-programs, a sub-platform providing businesses with a new portal to sell from. Today there are over 580,000 Mini-programs ranging from ride-hailing and food delivery to shopping. Thanks to the app’s massive social network, brands taking advantage of this scheme can potentially tap its 980 million monthly active users.

Needless to say, a number of luxury brands in the West are paying attention. In 2016, Coach exited Tmall in favour of WeChat’s approach to social e-commerce, and today it continues to run successful campaigns via Mini-programs. Givenchy, Dior and Gucci are also making use of the app, offering shoppers benefits like booking VIP appointments or exclusive deals, products and services in addition to selling products.

Outside of China, however, strategies like Mini-programs and chatbots are exploited considerably less. Messaging apps on par with WeChat, such as Whatsapp, have yet to offer commerce services, while only a handful of luxury brands and retailers have invested in chatbot technology (see Louis Vuitton and Burberry.)

Givenchy WeChat Mini-program

WalktheChat’s Graziani believes that while chat commerce is now essential for businesses in China, it remains a sensitive topic in the West because instant messaging apps are considered to be a highly personal communication tool. He warns that brands and retailers venturing into this realm risk being perceived as intruding into a consumer’s private space.

“There is a huge cultural barrier to messenger commerce outside China,” he explains. “In the West, customers are extremely reluctant to receiving promotions via chat interfaces, and brands who try to leverage WhatsApp or Facebook Messenger to sell will likely see a strong backlash in the foreseeable future.”

Nevertheless, companies will soon need to progress online strategies such as e-commerce and Instagram campaigns in order to capture the increasingly connected consumer: chat commerce is a promising next step. In China, it has evidently become a way for companies to streamline the purchasing journey for customers while maximising on the efficacy of the social sphere, and there's an untapped opportunity for brands in the West to follow suit.

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