Text-Based Commerce Takes Over
U.S. and European brands are following Chinese app WeChat’s lead in engaging with consumers through text messages.
WHY YOU SHOULD CARE
Because you’ll soon be getting more texts from your favorite brands.
From wishing a friend happy birthday to contacting a colleague about a meeting, text messaging is central to much of 21st-century life, with one glaring exception: commerce.
For the most part, western businesses continue to rely on mass emails to promote their products, while they continue to field phone calls through often overburdened customer service departments.
But the potential for brands to engage with customers and sell goods using pithy, personalized messages is vast. On the Chinese app WeChat, 170 million people browse for products — and pay for them — every day on more than 600,000 “mini-programs” within the app. They hail cabs, buy groceries, book doctor’s appointments and even get tourism recommendations through real-time crowdsourcing.
People under the age of 35 don’t want to get emails from almost anyone.
Brian Long, chief executive of Attentive
Now, after a series of failed starts, so-called conversational commerce may be set to gain traction in the West, as a host of tech companies attempt to follow WeChat’s lead.
In its new iOS 13 software update, Apple is prompting users on its iPhones who attempt to make a call to companies such as Burberry, Hilton and Verizon to “start a Business Chat instead, so you can interact with a business from a text instead of waiting on hold.”
Apple Business Chat, which was first announced in 2017, lets consumers communicate directly with brands within the Messages app — usually via sophisticated artificial intelligence chatbots — enabling them to ask questions about products and pay for them through Apple Pay, which is integrated into the platform.
“[Users] might have a particular question about tax statements, or want a video to learn about options trading,” said Vijay Sankaran, chief information officer at TD Ameritrade, one the businesses using the platform. “They don’t want to have to go on the website, or search YouTube. They can just … ask a specific question, and the artificial intelligence engine interprets it.”
Proponents say the reason texting works in commerce is the simplicity and intimacy of the experience. Consider what happens when a flight is canceled, causing 200 people to suddenly need to make new plans. Customer service is bombarded; passengers are left waiting on hold. Instead, an airline could let each person text their preferences, then put their phone away as an answer is worked on.
“The idea that [customer service] has to be this synchronous thing where you settle down for a 10-minute conversation on the phone is ridiculous,” said Charles Golvin, a researcher at Gartner. “The actual aggregate amount of time you need might be 30 seconds.”
The U.S. airline Delta has been testing Apple Business Chat through its Delta Fly app for several months, enabling users to shop for flights, update their seating and query things such as baggage allowance. It did not take long for text volume to surpass all of Delta’s social media channels.
“There is no shortage of demand,” said Tori Forbes-Roberts, a customer care specialist at the airline. “Intuition would say that millennials like it, but I will tell you that our core customers are just as engaged as the younger demographic who might be more tech-savvy.”
Making customers feel they are engaging with an individualized service that responds quickly with helpful answers is critical. Instead of hiring a massive staff to respond to each and every query, companies are deploying AI to field customer questions using chatbots, though these can defer to human employees when necessary.
“There’s a seamless back and forth,” said Alex Spinelli, chief technology officer at LivePerson, whose AI-powered conversational platform is being used by Apple Business Chat, WhatsApp Business, Facebook Messenger and others, enabling brands such as Home Depot, Goldman Sachs, Sky and Vodafone to communicate directly with consumers. “It’s a very simple process for escalating to a human.”
At TD Ameritrade, the security of integrating Apple Pay convinced the broker to let its customers purchase stocks over text message, and even fund transactions immediately through their bank account — a process that normally takes days.
“It’s really what the client wants,” Sankaran said.
So far, attempts to bring conversational commerce to the West have received a lot of hype but little traction. Three years ago, after Uber integrated ride-hailing into Facebook Messenger, product designer Chris Messina hailed 2016 as “the year of conversational commerce” — a prediction that never materialized.
“I don’t think ‘fail’ is too harsh — the uptake of commerce through messaging in the U.S. has been dismal,” Golvin said.
Nevertheless, momentum is beginning to pick up, with sales volume tripling in the past three years, led by in-app messaging within Facebook, Instagram and Pinterest.
Brian Long, chief executive of Attentive, a Sequoia-backed startup building text platforms for more than 400 brands ranging from Jack in the Box fast food to luxury apparel brand Coach, said it is becoming clear that email marketing does not work, especially among younger people.
“People under the age of 35 don’t want to get emails from almost anyone,” Long said. “Nowadays even when a friend calls, it’s like, ‘Do I really need to take this call, can’t I just text?’”
What may give Apple Business Chat an advantage over other platforms is not just the integration of its popular messaging app with Apple Pay, but also its privacy push. When iPhone users engage with a brand using texts, Apple stands as a sort of custodian to keep the user’s information — even their phone number — hidden, while payment can be done through encryption.
However it may risk being “too conservative around the slightest risk of spam or promotional content,” said Beerud Sheth, chief executive of Gupshup, a smart messaging platform, as Apple touts that brands cannot initiate a conversation with customers nor send coupons to a list of subscribers.
Apple declined to say how many brands are participating on Business Chat, but a deal inked earlier this year enabled all 800,000 online merchants on Shopify to engage with customers over text and transact with Apple Pay.
Michael Parry, director of product for conversational offerings at Shopify, said brands using text to engage with customers are building trust that translates into higher spending habits.
“You’re more likely to pay a premium [for] a brand you like,” he said. “And messaging, more than any other medium, powers that.”
Gartner’s Golvin said it could take some time for the opportunity to be fully exploited, but he is optimistic the pieces are in place for conversational commerce to take flight — and for Apple to reap the dividends through Apple Pay fees.
“They are getting a small percentage of each transaction,” he said. “But that number — the total volume that will be exchanged — it’s going to be gargantuan.”
OZY partners with the U.K.'s Financial Times to bring you premium analysis and features. © The Financial Times Limited 2020.