We have seen the transformation of retail with a significant acceleration last year. This has resulted in offline retailers improving their offering on their online channels and new e-tailers entering the market.
Typically, most retailers have followed a two-pronged approach to their online strategy - to list on an online marketplace and/or to create their own website/app.
In the first strategy, retailers worked with large online marketplaces such as Amazon, noon, Dubai Store and Talabat depending on their product. This enabled them to go-to-market faster as they only needed to provide products/pricing while the customer acquisition, listing, warehousing and logistics could be taken care by the online marketplace.
The challenge with this model was the loss of direct relationship with end customer and limited economies of scale to name a few.
Go direct, but at a cost
In the second strategy, retailers created their own app or website to reach customers directly. This enabled the retailer to control the end customer relationship and thus provide a differentiated experience.
However, the retailer needs to build or partner for the full-stack ecommerce capability to make the customer journey worthwhile. This makes the strategy expensive and relatively longer to execute.
Now, I am seeing a third viable option, conversational commerce, that retailers are leveraging to reach customers on the digital channel. As the name suggests, this involves selling by chatting or through conversations between buyers and sellers.
Get into chatting
The most common illustration of conversational commerce is seen in customer care. In this case, the customer chats with the retailer to get details on an order/product. There are many automations also being developed using artificial intelligence.
However, with emergence of chat-based platforms such as Messenger, Whatsapp and Telegram, retailers are now using these for active sales and discovery. A chat-based platform enables near instant go-to-market for retailers while ensuring a direct relationship with customers.
Minimal upfront cost
The initial investment for this is relatively low as retailers can create a community of loyal customers on the chat platform to share products details, take orders and fulfil them. Such a simple solution is attractive for small and even micro enterprises.
This allows retailers to test their offering over conversational commerce at a low cost and then refine it further before committing fully.
Our recent report shows that awareness about conversational commerce is relatively high with more than 90 per cent respondents in UAE already aware of this channel. I have bought products from more than 10 local entrepreneurs in UAE over chat and there has been more hits than misses.
There is still a long way to go for conversational commerce before it becomes mainstream. One of the biggest challenges to grow on this channel is to build trust between sellers and buyers.
Integration of payment infrastructure to the chat platforms is another important driver. Another would be to provide an on-par (and differentiated, if possible) buying experience compared to other dominant purchase channels.
I think that this channel has the potential to democratize digital channel even further and provide a level playing field to smaller enterprises.
- Sandeep Ganediwalla is Managing Partner of Redseer Consulting in Middle East.
