E-commerce worldwide is facing perhaps its biggest paradigm shift in how companies reach their customers. While the pandemic led to explosive growth for many e-commerce businesses, customer acquisition costs also dramatically increased, threatening sales and growth. For those looking to gain market share, in addition to a strong brand, relationships with customers have never been more important.
Over five billion individuals use messaging apps worldwide, on average 40x per day. In other words, messaging is today what email was in 2005. In China, messaging app WeChat revolutionised e-commerce by establishing Conversational Commerce (C-com) - giving businesses the ability to interact with their customers via different messaging apps, such as WhatsApp, and drive sales. C-com is taking hold in many parts of the world; however, for Europe and other Western economies, it has just begun. Retail and e-commerce companies looking to be at the forefront of this change will need a C-com strategy in place by 2023 and, based on the trends in China, messaging is set to become the primary way businesses communicate with their customers.
Martin Wettergren, Co-founder and CEO of Soultech, adds: “It's quite simple. Be where your customers are. The brands in e-commerce and retail that adapt to this reality will be the winners in the coming decade.”
China is the world leader in e-commerce and the industry is growing 4x faster than in the West. One of China's largest e-commerce platforms, Taobao, was founded almost 20 years ago at the height of the SARS outbreak. So, its not a hard guess that China was first in conversational commerce with it's superapp “WeChat”. WeChat was founded in 2011, and is bringing business messaging to the masses.
Social commerce and live shopping, long enjoyed in China, have now reached Europe. Elsewhere in the world, WhatsApp fills the same role as China's WeChat in South America and in Brazil even cars are sold through messaging. How many cars? General motors brought in sales through WhatsApp equivalent to 25 physical stores.
New ways to reach both existing and new customers are crucial for many companies right now. The pandemic increased demand for online marketing, pushing up the prices of online ads. Most retail companies point to the skyrocketing costs of new customer acquisitions as the biggest threat to sales performance for 2022. However, according to Meta, there is a solution. By click-to-message-ads, one can decrease their cost per inquiry by up to 86% while increasing their total number of leads by 6x.
An overwhelming 94% of consumers are displeased with the way companies communicate and 88% prefer a channel other than the company's app. Meta's Conversations conference in 2022 highlighted that messaging has a 79% higher open rate than traditional email, and email has a 20x lower click-through rate (CTR) than business messaging. What is more, apps are downloaded on average zero times per month, says Connie Chan at Andreessen Horowitz. About 64% of shoppers prefer chatting with businesses versus emailing or talking on the phone, according to Christine Purcell at Messenger. While web chats have seen some success in connecting with customers, the conversation ends when the window closes. Business messaging is asynchronous, meaning the dialogue never dies - the chat can be live and responded to at will.
Billions of people use messaging to chat with friends and family at their convenience and on their terms - the shopping experience can be just as modern. According to Klarna's latest Shopping Pulse study, online shoppers' top demand is personalised service and recommendations. Business messaging is inherently personal as well as convenient, making it easier for brands to enhance the customer experience more quickly and effectively. General Motors is a great example of how companies can create a shopping experience via WhatsApp that imitates the in-store experience, and GM continues to reap the rewards.
Meta is betting big, having recently launched the first end-to-end shopping experience on WhatsApp with India's JioMart. In India, customers can browse JioMart's catalogue, add products to their shopping cart, and pay to complete the purchase - all within WhatsApp. C-com sees a turnover of around €70bn today and many expect this to soar to €250bn by 2025. As Zuckerberg Tweeted, this is just the beginning of what will revolutionise e-commerce in the coming years.
Sources: Soultech, Sinch, General Motors, Meta, Juniper Research, Nasdaq, Statista (3 Oct. 2022)