When ChatGPT broke the internet this winter, the question on every online retailer's mind was how can I use this to automate the stuff I don't want to do? And what they discovered was that beyond generating product descriptions and writing emails, GPT's applications in e-commerce are somewhat limited. It can’t tell a customer when his order will be delivered. Its imaginative response to a question like “Does the bike I’m ordering have working brakes?” or “Which topical cream would you recommend for this rash?” could provoke a lawsuit.

But this isn't true of all AI chatbots. The technology that powers the AI behind GPT, can do much more than generate conversation when configured for an e-commerce use case. Endowed with natural language processing, the rule-based algorithms and decision trees that comprise traditional FAQ bots are given the power of context – making them more effective and convincingly human-like. They can digest product descriptions and tell you, with certainty, whether or not the bike has brakes. Some image-processing AI models will even take a crack at that rash.

As consumers become more comfortable interfacing with these more sophisticated chatbots, the opportunities for online merchants abound, especially in the customer service arena. First-mover DTC retailers that have integrated them into their CRM processes are already enjoying an advantage over their competition: in 2023 it's predicted that the majority of businesses using AI for digital commerce should expect more than a 25% improvement in customer satisfaction, revenue or cost reduction.

Here are 5 trends we see emerging as NLP-powered conversational AI goes mainstream for DTC retailers:

More efficient customer service

Retailers rely on their reputation and brand name to secure customer loyalty, so a personal touch is key. Because of this, many small retailers choose to field customer queries themselves, even simple ones like “Are you open right now” or “Do you ship to Canada.” AI chatbots free up the business owner to spend more time solving complex issues that need a human touch. They’ve been proven to reduce customer service costs by up to 30%. Another key perk is that they operate 24/7 hours a day, allowing you to service customers around the world while you sleep. And customers actually like talking to them. Reports show that 83% of people prefer chatbots to answer their questions and facilitate customer support in comparison to a human agent. And almost 90% of chatbot experiences are neutral or positive.

A more personalized customer experience

NLP-powered AI chatbots can leverage stored data to recognize a repeat customer and tailor product recommendations to them specifically. The sales potential this unlocks is enormous: research from Accenture revealed a staggering 91% of customers are more likely to shop with brands who acknowledge, remember, and present relevant offers and recommendations to them And It’s a big part of why Amazon reigns so supreme: product recommendations account for up to 35% of Amazon’s total revenue. The e-commerce chatbots of the future will equip SMEs with the same tools, with the added benefit of a uniquely branded experience.

Optimized inventory management

AI chatbots can be utilized to optimize inventory management and more generally digitalize the supply chain. For example, they can notify customers when products are newly back in stock, make customers aware of out-of-stock products or communicate anticipated delivery delays. On the supply side, they can automate procurement, allowing for a more consistent supply of the things people want.

Brand enhancement

Image is everything today. Some chatbot building platforms, such as ours, pride themselves on making customization easy. And it goes beyond just incorporating brand elements. Creative formats that liven up the traditional Q&A chatbot experience, such as games or puzzles, are proven to increase engagement. They show attention to detail and are simply fun. We did something like this for Unicredit and it was a big hit.

Data collection and self-optimization

Catering to your customers’ preferences and understanding their pain points is key for successful differentiation. An NLP-powered AI chatbot can collect this critical information gracefully, making the cumbersome customer survey process obsolete. When connected to an analytics platform, it can also generate actionable insights and self-optimize.

Lead generation

NLP-powered AI chatbots can be designed to automate the first step of the lead generation process, collecting a potential customer’s information and facilitating escalation to your sales department. If a customer isn’t sure which product is right for them, a chatbot can gather information about their needs and recommend something specific. As Amazon's success illustrates, personalized recommendations can have a huge positive impact on sales.