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Conversational Commerce Is the Latest Market Opportunity for Retailers

Retailers are generating more revenue from digital channels than ever before and 2020’s e-commerce boom only heightened that influx. Social commerce is also on the rise with platforms like Pinterest, Instagram, and Facebook boasting digital marketplaces—but who is to say there aren’t more ways brands can connect and sell to their audiences?

To maximize customer communication, a growing number of brands are using instant messaging apps. The global messaging industry accounted for 2.7 trillion messages in 2020 and reports from Juniper put the retail sector as the driving force behind this growth. 

Messaging apps weren’t always accessible for retailers who needed to connect with large audiences, but platforms like Whatsapp Business now include the ability to search product items, display a product catalog, checkout and make a payment. 


Digital channels are evolving

This intersection of messaging apps and shopping channels is what many are calling “conversational commerce.” But messaging apps aren’t just an essential piece of the checkout experience. Consumers have the ability to get customer support, chat with company representatives, read reviews, and receive personalized recommendations all from within an app. 

Brands have long used messaging apps to connect with customers at the point of entry or at the end of the customer’s journey, but platforms like Whatsapp Business, Facebook Messenger, and the startup Wizard are putting conversational commerce on the map.  

Still, conversational commerce has a long way to go before it’s adopted across the US. Most Americans don’t use WhatsApp daily and are far more accustomed to making purchases through traditional marketplaces, even if they’ve been digitized. 

But WhatsApp is the number one message app globally and other continents including Africa, South America, and Asia are using it and other messaging apps at scale. Triya, a Brazilian fashion and beachwear brand, grew its annual sales five-fold on Whatsapp after ramping up its presence on the platform three years ago. 

The South American brand identified Whatsapp as the preferred messaging app among customers and has since used it to handle customer requests, send order information, and provide receipts and tracking numbers.   


Whatsapp’s global stronghold 

Triya isn’t the only brand to make Whatsapp a second hub alongside their website. Estee Lauder and Richemont-owned Cartier use the app to communicate with clients via chatbots and ‘Cartier Ambassadors,’ respectively. 

Meta, which launched Whatsapp Business in 2018, introduced features over the last few years like Whatsapp catalogs to display stock inventory and carts to send orders. At the height of COVID-19, these features and optimized communication tools boosted total daily conversations between customers and businesses on Meta’s Messenger by more than 40%

For small to medium-sized businesses who cannot afford to run a website or physical store, Whatsapp Business became an irreplaceable one-to-one communication tool for more than a few brands. 

“It’s more efficient and cost-effective for businesses than traditional channels like phone or email,” said Ajit Varma, head of business products at Whatsapp. “For millions of businesses in countries like India or Brazil, Whatsapp is their website. It’s where they display their products or services, chat with customers to answer questions and coordinate sales.” 

Among African countries, a recent uptick in mobile phone usage means more people are finding ways to conduct business remotely. Winston Mano, a professor at the University of Westminster, explained that technology developed and manufactured in the West provides an opportunity for innovation within emerging markets. 

“Many people are using mobile phones as their office,” said Mano. “They’re using Whatsapp Business accounts to sell shoes, to advertise, to relay news; these are all innovative uses of Whatsapp which we don’t get in the West.” 


Wizard brings conversational commerce to the US

There is, however, a market opportunity for conversational commerce in the US and Europe. According to Mano, tech apps that are an integral part of society and commerce within emerging economies will trickle back into Western markets. 

“When you have these commercial uses of the mobile phone, they are not accidental, they’re really coming from efforts that are only going to monetise these spaces… [and] it can become a global solution,” said Mano. 

In the US, the conversational commerce app Wizard is making headway as it attempts to bypass Meta’s dominance. A B2B startup in the space, Wizard is now led by Marc Lore, who earlier this year stepped down from Walmart’s head of e-commerce to take the role of co-founder and chairman of the board. 

Similar to Whatsapp Business, Wizard hopes to connect brands with customers using text-based transactions. As advertised, Wizard will service the entire end-to-end shopping experience on mobile devices—from inventory information to search functionality, payments, and even reorders. 

According to Wizard’s co-founder and CEO Melissa Bridgeford, the team behind the app is working on text-based chat features that simulate a human experience. 

“What we’ve found is a combination of automation and human touch really provides the optimal experience for users, while also building a powerful technology on the backend that’s built to scale. That’s really where the Holy Grail is,” Bridgeford explained. “And that’s really what we see for the future of conversational commerce…we’re incorporating chat abilities, natural language processing—all of those technologies are moving very quickly.”

Wizard’s future is unclear, but Lore argues conversational commerce will dominate the retail space in the years to come. “With deep learning becoming more pervasive, the ability to create a hyper-personalized, conversational shopping experience is going to transform how people shop,” said Lore. 


A win-win scenario for conversational commerce

As is the case among Wizard, Whatsapp Business, and other messaging apps in the conversational commerce space, providing shoppers with a simplified end-to-end experience cannot be overstated in today’s personalized marketplace

Wizard raised $50 million in its Series A funding round last October and their focus on SMS instead of a messaging app differentiates them from competitors. Still, companies as large as Apple have already entered the market with Business Chat and Meta has plans to stretch its current offerings. 

Converting messaging apps into revenue generators may also be easier than it was a couple of years ago, as Bidgeford pointed out: “Brands and retailers saw their stores shut. They are being forced to innovate like never before, and to really find additional channels to transact with users… We’ve seen a super-fast change in both consumer behavior and retailer demand for conversational commerce.”   

Whether or not the pandemic continues to shape market patterns, conversational commerce appears to be a win-win for brands and their customers. Bypassing the web to make purchases on SMS is convenient, time-sensitive, and simple, but it’s also an extraordinary opportunity for retailers who cannot afford to lose more after a turbulent couple of years.