Conversational AI in Retail: Benefits & Examples

The retail sector is no stranger to digital transformation. E-commerce has permanently changed the retail landscape, presenting a new range of opportunities and risks. Above all, however, is the impact of digital evolution on customer behavior.

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Today’s customers have more options than ever before when it comes to choosing how and when they shop. In an era where ordering items online is easier than buying from a local store, retailers must cater to steep customer expectations to create valued shopping interactions or risk being left behind. 

An EY report analyzing the future of retail found three core customer demands that you need to address if you want to remain competitive and continue to win sales. 

1. Invisibility: Customers want seamless buying experiences where retailers fit into their lives with as little friction as possible. For subscriptions and repeat orders, customers are willing to allow AI/automation to take control so they have even less to do themselves. 
2. Indispensability: Customers want to buy from retailers who can improve their lives by optimizing their shopping experience and bundling products, services, and discounts around customer needs. 
3. Intimacy: Retail is a two-way relationship, and customers want brands to make them feel valued by providing them with experiences that resonate with them and suit their lifestyles. 

The rise of Artificial Intelligence (AI) will play a key role in helping retailers meet changing customer expectations. The value of AI in the retail market is already significant, estimated to be $11.83bn as of 2024 – and experts predict meteoric growth over the next few years, with market value reaching $54.92bn by 2033. 

Of all the forms of AI you can explore, Conversational AI offers the most potential for retailers who want to better service customers in an evolving, ever-demanding world. 

In this guide, we’ll explore what Conversational AI is, how it works for retailers, and the best ways you can implement this technology into your existing team to help you succeed in a fiercely competitive future.  

What Is Conversational AI In Retail?

Conversational AI is a type of AI that deals with Natural Language Understanding (NLU). It is used to hold conversations with users across text and voice channels, and it is capable of recognizing intent and understanding context. Conversational AI is not a standalone technology and is usually paired with Generative AI, which is a form of AI that generates text and content.

Learn more about each of these technologies and how they work together in our guide here.

For retailers, Conversational AI can power a customer-facing AI Agent that engages users in human-like conversations. This agent takes over the vast majority of the low-complexity, high-demand tasks that burden your human service team. The AI can work both reactively and proactively, fielding inquiries or reaching out to customers for matters such as returns or product recalls. 

As well as being able to hold conversations, the AI can also take the actions most appropriate to the conversation – whether that be updating a customer’s address at their request or alerting your customer service team if it recognizes a need for human intervention. 

Benefits of Conversational AI in Retail

Conversational AI brings a compelling array of benefits to retailers, with the capacity to support vital service processes whether you operate in a traditional retail model or solely practice e-commerce. 

Enhances Customer Service Offering

The majority of customer service calls for retailers can be separated into two categories: general queries and order issues. An AI Agent built with Conversational AI is capable of fielding the vast majority of both, which means your customers won’t have to wait on hold and can either get a direct resolution or have the mundane aspects of the call taken care of before being handed to a human agent.

By making it easier for customers to contact your business, ask questions, or have their issues solved, Conversational AI dramatically improves customer satisfaction without the significant cost of hiring new teams. 

Conversational AI works across both text and voice to further support customer preferences, meaning they can contact your team using their preferred approach. AI Agents also translate in real-time to offer multilingual support for customers speaking their native language. 

Implements Versatile Self-Service 

Self-service isn’t a new concept in the world of retail. You may already have self-checkouts in your physical stores – but it’s also a growing concern for digital consumers. Where possible, customers value being able to engage in self-service to accomplish basic tasks without the need for assistance. 

The key task is to balance the utility and empowerment of self-service against potential frustration or friction. You need a system that provides options for customers to accomplish tasks on their own but can also recognize when said user needs further support and take the appropriate action to provide it. 

An AI Agent provides a multi-channel self-service option that users can interact with across whichever device they choose. The AI Agent can then either answer questions directly, take the relevant action, or alert a human team member to intervene. This all helps contribute to a feeling of empowerment for the customer, who can take action immediately and either get their problem solved or be transferred to a human agent without having to wait on hold or resubmit basic identification. 

Augments Human Workforce

Though many employees may fear the idea of adopting AI because they think they’ll be replaced, the opposite is true: Conversational AI actually assists your existing employees in many different ways, which we’ll explore in the use cases section further in the guide. 

In doing so, AI Agents actually improve your employees’ overall productivity levels and reduce the labor associated with mundane tasks like identification and verification. With AI on their side, your team can better focus on more complex and rewarding cases. This makes managing and scaling your team more cost-efficient, improving job satisfaction and morale. 

Empowers Better Personalization 

Conversational AI is personal by nature – interactions will be highly specific to each conversation. The AI Agent is integrated with your backend systems and can view a customer’s CRM record, identify previous contact cases, and use all of this information to personalize the interaction further. 

Personalization goes beyond simply customizing dialogue to reference a customer’s name or other specific details. In retail, customers want businesses to anticipate their needs and tailor products and service offerings around them. 

An AI Agent can help support this by engaging in proactive conversations with users, gathering information about their needs, and then developing tailored recommendations or buying advice. 

Creates Seamless Buying Journeys

Friction is the enemy of any retailer. If a customer has to jump through too many hoops or encounter challenges in order to buy a product, they’ll simply switch tabs to the next competitor’s website. An AI Agent can exist as a top-level layer to tie a customer’s buying journey together, eliminating friction and ensuring a smooth journey from awareness to purchase and even providing post-sale support. 

Offers Proactive Support

Retail is about connecting with your customers. Being proactive is a key part of the marketing process, reaching out to customers to inform them about new offers or product launches – but proactivity is also important in customer service, too. 

Conversational AI allows you to practice personalized, proactive customer support. The AI Agent can notify a customer about a product recall, ask them for feedback, or even offer them a new deal. The customer can then take the appropriate action through the AI Agent, rather than opening a new window or switching devices. 

Use Cases of Conversational AI in Retail

The retail sector offers many opportunities to better interact with customers, both in-person and online. Conversational AI can improve some of the core processes in your business, with use cases that include: 

KYC/ID&V

One of the most obvious use cases for Conversational AI is in the role of ‘Know Your Customer’ style identification and verification processes. Asking customers for basic information to confirm their identity and potentially further evidence to verify them happens in almost every customer service case – which means it represents a huge time burden for agents. 

Conversational AI is more than capable of automating this process, alleviating the strain on your human employees. AI can even add value to the process by conversing with users through each stage, rather than forcing them to recite details flatly. 

Once verified, the AI Agent can route the case to a human agent who will have all the prerequisite information needed to resolve it. 

Order Information

Customers looking for information about their order represent the biggest demand on your service team. You’ll need to check order information, identify the issue, and potentially take further action, such as querying your logistics partners to confirm delivery details. All of this eats up time, reducing efficiency and potentially frustrating customers. 

Conversational AI gives you a way to automate any order-related queries better. The AI Agent can take all necessary details, look up the order in your CRM, and either respond directly or flag the case for further attention. Throughout this, you will be conversing with your customers to ensure they feel supported.  

The AI Agent can also help process returns or refunds. It can take the necessary information from a customer and even guide them through photographing a faulty item/proof of return. This reduces friction because a customer doesn’t need to go through multiple stages and can complete the entire return in the same interaction. 

Questions & Answers

Customer service cases aren’t always related to existing orders. Often, your team fields calls where a customer asks basic questions about product information, opening hours, stock availability, etc. 

There’s a fine balance to strike between available resources and being able to answer these queries in a way that makes a customer more likely to buy. An AI Agent is the perfect automated solution, giving your customers a resource that they can ask questions to at any time and through their preferred contact method. 

Agent Assist

Conversational AI isn’t just about AI Agents interacting directly with customers. Agent Copilot allows your AI Agent to support existing employees and improve the quality and speed of their service.

During a customer interaction, the AI Agent will automatically transcribe the user’s input and if required, translate it. It will pre-verify the user and provide full case context to your human team, equipping them with everything they need to know before they even open the call. 

Once the call is completed, the AI Agent will even create a summary and log it for the agent – further removing another time-intensive, manual task and helping them be more efficient. 

Shopping Assistant

Retail customers have already embraced virtual assistants and live chat support as a result of the e-commerce boom. You can use Conversational AI to build a valuable self-service shopping assistant that helps customers shop online or in-store. 

From directing users to the right area in a store to personalizing recommendations based on size or style preferences, your AI Agent helps streamline the buying journey to improve the likelihood of a successful conversion. 

Examples of Conversational AI in Retail

Want to see how Conversational AI can work in the real world? Let’s see how one of Europe’s leading digital opticians is harnessing the power of AI to better serve their customers…

A Better Vision For Customer Service

Mister Spex is one of Europe’s biggest digital opticians, with millions of customers across multiple countries. The brand’s customer excellence team continually grappled with high customer demand, often resulting in long hold queues and frustration.

Working with Cognigy.AI, the business implemented a fully automated customer service agent that could field phone calls and either resolve the query or qualify the customer and route the call. This ultimately led to saving over 30 seconds per call – adding up to an enormous efficiency gain over a calendar year. 

Interested in learning more? Read the full case study here. 

Best Practices for Conversational AI in the Retail Sector

Feeling ready to explore AI integration in your retail business? Here are some best practices you should implement in order to give yourself a good foundation for growth and avoid costly mistakes. 

Start Small & Scale

Retail is a complex business model that involves many different customer service processes, from basic product queries to tracking down lost orders or issuing refunds. To implement AI effectively, you should start with a lower complexity use case and scale from there. ID&V is often the go-to choice as it represents significant time commitments for human agents but can be easily automated to start generating immediate results. 

Assess Existing Systems

An AI Agent is best thought of as a meta layer that sits above your existing systems and processes and can interact with them to best support a customer’s needs. For example, the AI Agent should be able to verify customer information against their CRM details and then access your database to track down their order. 

To accomplish this, you’ll need to ensure your legacy systems are suitable for AI. Most standard tools and technology are fine – but some retailers have bespoke tech that may cause issues. Involve your development team in any conversations with an AI provider to help reduce the chance of problems. 

Brief Your Employees

Human customer service teams fear AI because of misunderstandings. If you’re considering an AI Agent, you should brief your team and demonstrate how it can improve their workflow and improve their lives, Agent Assist being one well-loved example. This will help reduce anxieties and also ensure the team can utilize the AI more efficiently when you go live. 

Use Cognigy to implement Conversational AI solutions for your retail business

Cognigy.AI is an expert AI provider that works with retail clients across the globe. We bring powerful automation to enterprise brands to cut costs, increase agent efficiency and improve overall business performance. 

Seeing is believing, so book a demo with our team today. 

Frequently Asked Questions

What Is the Difference Between a Chatbot vs Conversational AI?

A chatbot is a term used to describe pre-AI chat interfaces that allow for limited customer interactions locked to pre-defined responses. Conversational AI is a type of AI that allows for natural language understanding and can be used to build smarter chatbot technology. 

What Are the Risks of AI in Retail?

The main risks of using AI in retail are related to data privacy. Businesses need an AI provider who can work with them to ensure all data is stored safely and securely in compliance with local regulations.  

How Is AI Used in a Retail Store?

AI can be used in different ways in a retail store. Often, it enhances buying experiences by acting as a shopping assistant that directs customers to products, answers questions, or provides guidance. 

How Can Conversational AI Help Improve Customer Experience?

Conversational AI provides a means to field customer queries quickly and speed up effective outcomes. AI improves customer experiences by removing the need for hold queues and providing 24/7 access to efficient customer service.