- The Fringe
- The Future of Selling: How AI Will Transform eCommerce
The Future of Selling: How AI Will Transform eCommerce
Plus: Shopify sets a Black Friday record | How to deal with "bracketing" | Why everyone needs a hobby
Aloha! As we close out the year and you begin to reflect on everything, what were some of your most defining moments of 2023? What would you do differently, given everything you know now?
Looking forward to 2024!
By the way, some of the Rep AI team will meet in London next week for 2024 planning. If you’re in the area, give me a holler. Onward!
Editorial: The Future of Selling: How the Conversational Effect Will Transform eCommerce
The Latest: Shopify sets a Black Friday record
BX: Relational Commerce — The next big shift in commerce
MX: Rethinking The Affiliate Marketing Playbook for eCommerce
UX: Temu, the #1 app in the app store, and what NOT to do in eCommerce
CX: Bracketing & Returns
EX: Why everyone needs a hobby
DX: How climate change is changing consumer behavior [data]
Let’s talk about AI and the Conversational Effect.
The Future of Selling: How the Conversational Effect Will Transform eCommerce
In the history of technology, AI stands out as a game-changer, especially for business. Today we see AI's profound impact on how brands interact with customers and drive more sales. And it all started in 1966 with the very first chatbot named Eliza.
The Eliza Effect and Its Evolution
Joseph Weizenbaum's creation of Eliza in 1966 marked the beginning of conversational AI.
Eliza demonstrated the human tendency to attribute understanding and empathy to machines based on scripted responses – a phenomenon known as the Eliza Effect.
He saw this firsthand with his then-secretary, after asking her to try it out. Here’s what happened next.
“She sat down at the keyboard, and then she began to type, and of course, I looked over her shoulder to make sure that everything was operating properly.”
Imagine interacting with a machine like this in 1966
After two or three interchanges with the machine, she turned to me and she said, “Would you mind leaving the room, please?”
The secretary was so entranced by the machine that she didn’t want to stop exchanging messages.
Weizenbaum saw this happening over and over again. People would reveal very intimate details about their lives to the program. It was like they’d just been waiting for someone, for something, to ask.
Weizenbaum’s initial reaction to Eliza’s user’s reactions was a bit of shock and dismay:
Creator creates Frankenstein — you know what happens next
Today, AI has advanced far beyond Eliza's capabilities, leading us to a new era: The Conversational Effect.
The Conversational Effect Explained
In 1966, Eliza was quite advanced for a simple AI. People ‘felt’ that the machine was capable of interest and understanding, dare I say, empathy. But it was simply running a scripted program.
Today, the Conversational Effectto influence and persuade, which ultimately drives sales for digital stores. represents AI's ability
This ‘effect’ signifies a shift to AI-driven conversations that are contextually aware, personalized, and capable of handling complex customer questions and situations. Or simply having a conversation with a customer about anything.
Here’s an example of the ‘effect’ in action from Rep’s platform:
Customer likes the founder’s mullet
AI maintains relevance and steers the conversation capably
Pretty good, huh? But does this lead to sales? It does…
Impact on Sales and Customer Experience
The real power of the Conversational Effect is evident in its impact on sales metrics and customer experience. I spoke to two brands, Herbaly and Harney & Sons, about their unexpected results with AI.
Herbaly witnessed its Revenue Per Recipient (RPR) double when email was captured through the AI compared to more traditional methods, like pop-ups.
RPR is a metric that measures the effectiveness of your email marketing by calculating the average revenue generated per email sent. It's a critical KPI for understanding the ROI of your email campaigns.
For example, If you send 100 emails and generate $200 in revenue from those emails, your RPR would be $200/100 = $2. Pretty simple, right?
For whatever reason, their RPR doubled when collecting emails through the AI. When I asked Herbaly why that was, they replied, “I don’t know. I just know it works.”
Harney & Sons
Harney & Sons is another example where implementing AI resulted in conversion rates jumping from 7-8% to an impressive 20-23%. How do you get a 250% conversion bump just by putting a ‘chatbot’ widget on your store?
Again, I asked, why that was. And again, I got roughly the same answer: I don’t know, but it works.
Is it the fact that dynamic chats are relational? Is it the UX of the chat itself, because you can search & discover new products, get all your questions answered, and even navigate to product pages and checkout—right in-chat?
The Future of AI in eCommerce
As AI continues to evolve, its role in eCommerce will expand beyond current capabilities. We're entering uncharted territory, with AI set to offer even more personalized, adaptive, and nuanced interactions, profoundly influencing digital commerce.
We’ve come a long way since the Eliza Effect. The Conversational Effect is not just an upgrade but a complete overhaul of how businesses will interact with customers, making every conversation an opportunity to serve, sell, and support someone along their buying journey.
Shopify sets black Friday record
Hopefully, you had a great BFCM. From the looks of it, Shopify stores in general, did quite well. And more than just the digital side of things. Many shops like Warby Parker or Allbirds are more hybrid retail and digital, so those numbers were factored into this equation as well.
Let’s keep the momentum for the rest of the year and beyond.
Relational Commerce [links]
I’ve been talking a lot about Relational Commerce lately, and just wanted to share a list of some resources so you can understand the concept better.
I believe that AI, as a technology, can really accelerate this movement (because the Relational model is a movement), and set the table for the future of commerce. AI can also do something impossible in physical stores: give everyone its undivided attention. And that matters.
From the reading list below, this story from Steve Knox resonated:
My first memory of commerce had nothing to do with the actual transaction of money for goods. No, my first memories are relational - specifically how Rose treated my grandparents while we ate dinner at Alpine Restaurant inside the Creston Park Mall.
I have no idea how much the meal cost, how big or little the tip my grandpa left, or if they felt they received a decent value for the money spent. Rose gave my grandpa the business and he loved every minute of it. In turn, he gave it back. That's why I loved going with them each week.
The transactional piece is always the easy part. Online retailing makes it almost an afterthought and online shopping doesn’t need to bother with the relational part of commerce.
Sadly, I have seen the brick and mortar retail landscape lose what made them special. At many retailers, I am only a transaction. I started seeing it after I made my first Amazon purchase in the spring of 1998…yikes I am a 20 year Amazon subscriber.
If you’re at a chain/mega store, the transaction is always key. The interaction is rarely highlighted. Remember the Wal-Mart greeters in the 1990s? They’d welcome you. They typically asked how you were. In my opinion, it was Sam Walton’s attempt to keep mega commerce somewhat relational. Have you walked into a mega store recently? It’s tough to get eye contact let alone a response if I initial the ‘hello’.
It's all about the transaction and for this consumer, a transaction can be made online.
Enjoy the list:
Featuring the story above: Relational Vs. Transactional by Steve Knox
Affiliate Marketing in eCommerce
From Modern Retail, a short primer on the new playbook in affiliate marketing for eCommerce brands.
Affiliate marketing has become a key component of a brand's marketing mix. It opens up new avenues for revenue generation and enhances the brand’s credibility, based on the reputation and reach of the affiliate partners.
Intense competition, especially during the holiday season, and the impending changes in online tracking technologies, make affiliate marketing a must-have channel for up-and-coming DTC brands.
Things to consider:
Find Reputable Publishers: Maximize the impact of your affiliate marketing strategy by partnering with credible publishers. This approach not only boosts revenue but the added benefit of enhancing your brand's reputation. It’s always a game of association when it comes to brands.
Stand Out in a Crowded Market: The age-old question: how do you differentiate your brand in the affiliate marketing space? Try to develop unique campaigns and offer exclusive deals or content that set you apart from competitors.
Embrace SEO and Evergreen Content: Think SEO along with your affiliate links and focus on creating evergreen content. You want long-term visibility and relevance in search engine results.
Prioritize Personalization: Go beyond financial incentives and the heavily focused transactional nature of your affiliate relationships. Tailor your approach to each partner, and really understand their audience needs.
What NOT to do in eCommerce
Ok, here’s an entertaining story from our friends at Growth.Design on what NOT to do in your digital interactions.
Maybe Temu, a highly addictive app, can get away with it. But really, how long will their tactics last?
Bracketing & Returns
There’s an estimated $627.3 billion in retail returns in 2023. And consumers are taking advantage when they intentionally buy multiple variations of an item with plans to return the ones that don't work out.
This trend is called “bracketing” and, as you can see, is very costly.
This article explains what’s happening and what some brands are doing to slow down this trend.
For instance, Amazon allows returns until January 31 for items purchased from November 1 to December 25, while Kohl’s and Macy’s have similar generous return windows. Some retailers are starting to charge restocking and shipping fees for returns by mail to discourage excessive bracketing.
Some of things you could do:
Implement Return Fees: Introduce shipping and restocking fees for returns made by mail to discourage customers from excessive bracketing. Use this combined with the next tactic.
Highlight Environmental Impact: Let customers know about the environmental toll of returns, such as increased plastic and cardboard waste, and carbon emissions. This also aligns with the growing trend of sustainability (mentioned in DX).
Leverage Return Data for Personalization: Utilize shopper purchase-and-return data from loyalty programs to offer more personalized product recommendations. Put more effort in helping shoppers find product-market fit.
Why everyone needs a hobby
A reminder from Sumeet Moghe on why we need an alternate or more expansive identity outside of work—and hobbies can facilitate that.
From the article:
If you’ve lost touch with something you’re interested in, and work fills up most of your time, I urge you to reconsider how you divide your time. Our value systems may differ, so I can’t expect you to think like me. That said, consider what diversifying your identity and relationships can do for you. That way, if your job doesn’t meet your expectations someday, something or someone else can still make you smile!
Worth a read.
EY Future Consumer Index: Climate + Consumer Behavior
For those who scoff at climate change and sustainability as a business advantage—well, you’re not wrong—completely. But headwinds are changing, and even if they’re changing slowly, there looks to be a massive shift in how people buy.
Some people will always side with product quality, no matter what. And more than ever before, people are siding with the planet.
Just look at Liquid Death, a $700 million beverage company with an extreme brand that communicates explicitly, “Death to plastic!”
So, if this data is any indicator, then be prepared to adapt—or die. From the research:
Consumer products companies and retailers can’t ignore the large percentages of consumers who are thinking about changing their lifestyles and consumption habits in response to climate change, which have now reached significant levels. Some consumers have already made changes out of necessity, and more are likely to follow.
For example, 42% are thinking of changing the food they eat because climate change has pushed up prices or limited availability, and 29% have been forced to make new choices already. The proportion that has already started to buy products that protect them from a changing climate is also high, at 25%.
Looking forward to London. Hope you’re all staying warm out there (unless you’re in the southern hemisphere or equator).
See you in a few weeks.