Conversational AI, the Answer to Retail’s Top 3 Challenges in 2023

In many ways, the retail industry is unrecognizable from a decade ago. New technologies, an omnichannel experience, and changing consumer expectations as they become more digitally savvy and well-informed have changed it forever. The pandemic has also accelerated long-term trends, hastening the inevitable widespread adoption of online shopping.

Periods of transformation can be interpreted as either periods of challenge or opportunity - those companies that maintained their flexibility and adapted to new trends are better positioned to succeed, while those that did not are being left behind by the world's fast-moving retail environment. 2023 will be no exception; while the rate of change may have slowed from the previous two years, the sector will be characterized by several trends this year.

Here are the top three that, in our opinion, will have the most significant impact on the industry.

Customer Experience Tops Everything

The world's largest brands, with businesses over $1 billion per year, can expect to earn, on average, $700 million more within three years if they invest in customer experience (CX). That's a significant financial reward for prioritizing customer experience, demonstrating its importance in today's retail industry. In fact, according to one study, customer experience rather than the product is now the primary differentiator for brands. There is a lot to be gained by improving the customer experience because 86% of shoppers are willing to pay more for a better shopping experience.

The customer experience is, thus, critical to the success of your retail business. In a competitive retail market, it is often the brands providing an excellent experience that thrive. And the industry is clearly aware of the significance of customer experience, with 45.9% of retail businesses naming it as their top priority over the next five years.

However, the customer experience cannot remain static; it must evolve alongside the customer. Customers' expectations of retailers have shifted dramatically in recent years. This trend is expected to continue in 2023, with customer demands including a desire for more conscientious brands and an increased demand for consumer feedback.

Customer experience is also central to ensuring brand loyalty at a moment in which customers can effectively make acquisitions on a global market flooded with many options. In the past, making a sale without attempting to entice the customer to return was a common way forward for many retailers. In today's business world, though, this is frequently a recipe for disaster. Traditional customer loyalty programs, such as special offers and promotions, are still effective, but personalization is becoming more popular. It is critical to maintaining communication with customers to keep them loyal to your brand. Moreover, if customers value product quality, excellent customer service, and environmentally sustainable business practices, an experience incorporating all of these elements will undoubtedly increase your chances of customer retention.

Omnichannel Is the Way to Go

Purchase journeys in retail are becoming increasingly complex. Customers want a more streamlined and enjoyable shopping experience across all channels, all the time. eCommerce has experienced a dramatic rise in the past few years – in 2023, 218.8 million US consumers are expected to shop online – the equivalent of approximately 65% of the entire US population.

Even globally, eCommerce sales are expected to account for 20.8% of global retail sales in 2023. This means that, while physical stores are still a point on which retailers should direct their attention, customers interact with their favourite retailers through various channels. In return, retailers must engage with customers wherever they are to be found, which requires a good omnichannel CX. The key is to provide them with a consistent experience across all channels, be that a physical store, the website, social media, or other.

Because it increases sales, omnichannel is one of the hottest retail trends for 2023. Using three or more channels can increase orders by nearly fivefold. In addition, omnichannel shoppers spend 10% more online and 4% more in-store than single-channel shoppers. Retailers who invest in omnichannel sales perform better because they cater to how customers prefer to buy from them. Almost three-quarters of shoppers prefer to shop through multiple channels, and half research products online before purchasing them in-store.

The omnichannel strategy, which integrates and integrates all existing channels for customer interaction, creates a seamless customer experience. It's a wildly successful strategy, with businesses that use omnichannel strategies seeing a 91% increase in year-over-year customer retention. However, to successfully use omnichannel, retailers must optimize every customer touchpoint and ensure brand and customer experience consistency—including in-store experience. Those with weak and inconsistent omnichannel strategies have a 33% lower retention rate and a lower annual revenue increase.

Personalization, personalization, personalization...

Personalization in 2023 means far more than simply including a customer's name in an email. Customers expect personalization in the form of product recommendations, sizing, and intelligent cross-sells. This retail customer experience trend isn't just a nice-to-have — 72% of shoppers say they'll only respond to retail marketing messages if personalized, and 36% believe retailers should personalize the shopping experience even more. Brands clearly have their work cut out for them in 2023.

Consumers not only want but demand personalization. With store and product loyalty becoming more elusive, getting it right is critical. Approximately 75% of consumers have tried a new shopping behaviour since the beginning of 2020, and more than 80% intend to continue with new behaviours. Furthermore, according to the same study, companies that excel at personalization generate 40% more revenue from those activities than average players. Personalization leaders achieve results by tailoring offerings and reaching out to the right individual at the right time with the right experiences.

How Conversational AI Can Answer the New Year's Retail Challenges

As previously stated, consumer trends are constantly changing. In such a dynamic environment, brands must continuously find new methods to keep improving the shopping experience they offer to clients and thus remain competitive. One such comprehensive method refers to conversational AI, implemented either to support specific use cases or as wider-ranging solutions capable of understanding even complex consumer questions, retrieving answers, and providing adequate results in real-time. When used in a wider context, AI algorithms allow retailers to extract the necessary data to pinpoint new shopper trends more quickly. Alternatively, they can be used to anticipate the right moments when their assistance is required, for example, by only appearing at customer pain points, such as hesitation on a specific product page or during the checkout process.

Providing a great customer experience in retail becomes easier with conversational AI implemented in different forms. The most common form is in the guise of a virtual support assistant, a powerful AI bot that can provide relevant guidance to human customers at any time, on any platform, and in virtually any language. The first rule of any retail business is never to make a customer wait but doing so on a large scale is not easy. Customers dislike waiting for a response when they ask a question or request online. According to an Aspect Software report, 73% of customers prefer self-service options, which provides a strong impetus for retailers to implement conversational AI solutions.

Conversational AI assistants can additionally help with providing information on inventory and promotional deals or help customers familiarize themselves with store offerings before even entering the store. This assistance provides a more fulfilling experience for customers by making them aware of the product and offering incentives to encourage repeat purchases. As a result, customer loyalty is increased while churn is reduced. Used in this way, conversational bots can bridge the gap between online and offline, optimizing the omnichannel experience for the end user.

Data is abundant in the retail industry; retailers receive valuable data on product inquiries, order tracking, customer queries, and so on every second. This information can provide valuable insights into customer behaviour and assist businesses in targeting customers in a more personalized manner. AI virtual assistants act as powerful and effective "data detectives" for retail, collecting and analyzing consumer data to derive actionable insights. Retailers can then personalize their outreach to each individual customer, increasing engagement by recommending relevant products. Conversational AI can be extremely useful in assisting businesses in developing targeted strategies.

Why Is Conversational AI a Must-Have for 2023?

Cut Costs

AI virtual retail assistants enable businesses to provide excellent customer service without increasing headcount. Companies can use technology to reach out when a customer receives an order while still remembering the entire history of communication with the company. The outcomes of an intelligent outreach will reveal whether customers are willing to recommend the company to others and will assist businesses in fine-tuning their strategy, loyalty program, and rewards system.

Enhance Service Quality

Virtual AI and voice assistants can answer consumer questions 24/7, on holidays and weekends. AI-powered assistants, unlike human agents, do not require sleep and can assist customers even after business hours. Customers are naturally more satisfied with services when they receive immediate assistance.

Increase Response Rates

Conversational AI assistants respond instantly, consistently, and precisely without providing unnecessary information to the customer. They can access order history when integrated with other internal systems, and customers do not have to repeat basic information about themselves.

Improve Customer Communications

Businesses can use virtual AI assistants to stay in touch with customers and inform them about new products, promotions, and discounts. Having a log of previous orders and customer interest, such recommendations can be fully personalized, better answering the customers' expectations and setting the scene for an excellent shopping experience.

Enhance Loyalty

An excellent customer experience, whether through actual shopping process interactions or pre- or post-sales support, builds the foundation for establishing trust and loyalty to the company. Brand supporters are important in competitive industries such as retail because it costs much more to acquire a new customer than to retain an existing one.

Personalize the Experience

Personalization in marketing has been around for some time: 75% of consumers are "interested in purchasing from brands that provide personalized digital experiences." Businesses need specific data to provide this hyper-personalization, and virtual AI assistants can easily handle data collection faster and at a lower cost.

To Conclude

In 2023, retailers will face a slew of new challenges. They can, however, expect to thrive in the emerging business environment in the coming year if they foster customer loyalty and provide a memorable purchasing experience. In short, they must devise a way to provide customers with the best of offline and online worlds, namely touch and feel and convenience. Conversational AI is the solution to most of their problems; retailers can provide 24/7 customer service, mine consumer data for actionable insights, and engage customers with interactive content, thus providing a personalized experience to the customer. With this in mind, 2023 is undoubtedly the year when conversational AI will become a "must-have" for retail enterprises.