10 minutes

An exclusive survey by Internet Retailer examines how many shoppers are using tools such as augmented reality and voice search. The results might surprise you.

During Mike Edwards’ tenure as CEO of eBags Inc., the web-only luggage retailer rolled out a Facebook Messenger chatbot and an Alexa skill. The chatbot can handle customer service queries, as well as simple sales questions, while the Alexa skill lets shoppers ask their Amazon Echo device questions about their eBags orders.

The decision to invest in those technologies wasn’t easy. After all, he was regularly bombarded with a nearly endless array of technologies—ranging from augmented reality to visual search—that offered the promise of transforming the way that consumers shop. However, Edwards—at eBags, which Samsonite International SA bought last year, and in his previous roles at Staples Inc., Borders and activewear retailer Lucy—has long tried to zero in on the tools where he can see a clear value to shoppers and a reason that would compel them to use the technology.

“You can’t boil the ocean,” says Edwards, who left eBags last September. “Sure there may be 50 different technologies that you can pursue at any one time, but no company has the bandwidth to deal with everything that’s out there. I’ve always sought to invest in areas that may yield better performance and that may improve the customer journey.”

EBags developed a chatbot and an Alexa skill because the retailer could envision clear ways that those tools could benefit shoppers. For instance, both the chatbot and the Alexa skill could help a shopper get immediate answers to their customer service questions. However, whether that’s happening remains to be seen, he says, noting that both tools are “still unproven.” And, when looking at the return on investment from the initiatives he notes that they’re “cool toys,” Edwards says, “but they’ve had no impact on sales.”

That experience is far from unique, according to a new Internet Retailer-exclusive survey of 1,011 online shoppers conducted by Toluna. For instance, only 19.6% have interacted with a retailer using a chatbot. And less than half, 44.2%, of the 27.1% of consumers who own a smart speaker such as an Amazon Echo or Google Home have used their devices to make an online purchase.

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Those results aren’t surprising given that the technologies are still nascent, says Mark Simon, managing director, North America for Toluna. But Simon believes that the early signs suggest that consumer awareness of these technologies are building and that usage of many of them, such as smart speakers, is likely to grow. “As people gain further exposure to these [tools] and prices start to drop, their usage will continue to grow,” he says.

While the survey results show that the next wave of e-commerce innovation may not yet be producing much in the way of sales for e-retailers, they also show signs that the current landscape may be starting to change. For instance, 22.5% of respondents have used virtual reality goggles or a headset, such as Oculus Rift or Google Cardboard. And while use cases such as playing video games (cited by 73.7% of those who have used virtual reality goggles) and watching videos (73.7%) are the main ways that consumers who have used virtual reality goggles or a headset are interacting with the technology, 50.9% of those consumers have used those tools to shop. And 58.3% of those consumers are interested in using virtual reality goggles or headsets to shop.

By experimenting with cutting-edge technologies such as virtual reality or chatbots that offer the promise of making it easier for consumers to buy online, retailers like eBags, Overstock and ProFlowers are seeking to arm themselves if, and when, shoppers embrace the tools.
“It’s still early days,” says Kevin Saliba, senior vice president of marketing at zulily, which along with Everlane, was one of retailers that Facebook highlighted when the social network opened up its Messenger chat app to chatbots at its F8 developer conference in 2015. “We’ve been tweaking and optimizing [our chatbot] to try to figure out what our customers want. We’re trying to be where our customers want us to be.”

Consumers’ expectations may be changing far more rapidly than many merchants realize, according to the survey. For instance, 30.1% of consumers have used an augmented reality tool on their smartphone to visualize how an object, such as a couch, would look in the real world. And 46.1% are interested in using that type of technology within the next six months.

That’s despite consumers needing to have a sophisticated smartphone in order to use augmented reality features. For instance, while Apple Inc. last June unveiled ARKit—a set of tools retailers can use to build augmented reality features in iOS apps—those features are only compatible with the latest iOS software and iPhones that launched November. That meant, as of November 2017, augmented reality was available to any consumer with an iPhone 6s or newer running the iOS 11 operating system; as of December, 59% of Apple devices used iOS 11, according to Apple.

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But as momentum builds as consumers come to understand, and try out, augmented reality, the technology will become more common among online merchants—particularly those that sell large products such as home goods that are large and expensive, says Amit Goyal, senior vice president, product and engineering at Overstock.

“In retail you don’t want to be too early to a technology,” he says. “But at the same time, you don’t want to be too late. For us, we think about the question, ‘What’s the customer problem that this particular technology is trying to solve?’”

For augmented reality, that question was easy for Overstock to answer: Make it easier for shoppers to visualize how an item such as a couch will fit in their homes. Virtual reality has a similar use case, which is why the retailer early this year plans to test a new virtual reality program that enables a consumer to upload several pictures of a room, provide some details about their style and taste preferences, and then allow the retailer to virtually design the room for the shopper who can view it using a virtual reality goggles or headset.
“This is an experiment,” Goyal says. “We want to see if consumers will use the service.”

ProFlowers is similarly experimenting with chatbots to determine whether consumers will use the tools to buy within Facebook Messenger. The flower and gifts retailer in December launched a chatbot called Virtual ProFRESHional that aims to streamline the process for searching and buying flowers and other gifts without leaving the messaging service.

ProFlowers embraced the idea of launching a Facebook Messenger chatbot because Messenger is one of the few apps that consumers regularly use; 18% of consumers between 18 and 34 listed Messenger as an app that they couldn’t “live without,” according to a 2017 comScore Inc. survey, which put it behind only Amazon (35%), Gmail (30%) and Facebook (29%). But getting those Messengers to buy—or even interact with—a retailer’s chatbot isn’t a given, which is why ProFlowers has launched an advertising campaign that uses ads within the Facebook news feed to build awareness of it.

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The retailer aims for the chatbot to make shopping easy, which is why Virtual ProFRESHional offers a narrower selection than ProFlowers.com, roughly 40 SKUs compared to about 150, says Raphael Weishaupt, senior vice president of brand and acquisition marketing.

“Chatbots should offer a convenient, streamlined experience,” he says. “ProFRESHional offers an arguably more streamlined experience than our website.”

A few weeks into the chatbot’s launch, Weishaupt wasn’t ready to comment on how consumers were using the tool. However, Internet Retailer’s survey finds that while a little less than one in five shoppers does want to engage with a brand via a chatbot, many more prefer more traditional customer service methods, such as in person (cited by 73.9% of respondents), on the phone (63.9%), email (62.4%), live chat (41.0%) and even text message (27.9%).

Those results suggest that chatbots need to offer a better experience than consumers can get elsewhere in order to take hold. After all, retailers can look to apparel retailer Everlane to understand why different isn’t necessarily better. At Facebook’s 2015 F8 conference Everlane announced it would offer consumers the option to have their order confirmations and shipping updates delivered to Messenger rather than email (it also provides customer service support via Messenger). But in March 2017, it discontinued the service because consumers weren’t interested (it continues to handle customer service queries via Messenger). “It was a good couple of years, but we’ve decided to stick with what we do best—email,” the retailer wrote in an email to customers. The retailer declined to share more details about the decision.

Weishaupt believes that consumers are just starting to understand the utility of a chatbot. For instance, at some point this year he plans to add visual search, which mode.ai, the vendor the retailer worked to build the chatbot, already offers. That functionality could enable a consumer to upload a picture of blue tulips to search for a specific bouquet. “A lot of people don’t know the difference between a rose and a tulip,” he says. “Visual search could help them find what they’re looking for.”

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The survey suggests consumers that offering a visual search tool could boost sales. 39.0% of consumers have used visual search to help them find a product—and 74.9% of those who have used the tool said that visual search led them to complete a purchase. The survey also found 41.5% of consumers said they’d be interested in using visual search within the next six months.

Those results suggest that consumers’ behaviors have rapidly changed, says Overstock’s Goyal. A few years ago the retailer launched an image search that allowed shoppers to upload pictures within the Overstock app to search for related products. But few consumers used the tool, which may have been because the experience wasn’t great thanks to a less-than-optimized algorithm, he says. “Or maybe we just don’t sell products that visual search makes sense for,” Goyal says.

Overstock turned the feature off a while ago. And while it continues to discuss whether visual search may make sense to roll out in the future, it isn’t actively working to develop the technology. “The world has gotten so complicated that it’s hard to figure out what technology will take hold and when,” says Jon Nordmark, the co-founder of eBags who is now co-founder and CEO of iterate.ai, a company that connects executives with technology startups. “And that’s before you begin to factor in the importance of a retailer executing on its vision for the technology.”

Before a retailer rolls out a new technology, Nordmark urges retailers to pay attention to their customers’ behavior patterns. For instance, while Amazon doesn’t release the number of Alexa-enabled Echo devices it has sold, securities research firm Consumer Intelligence Research Partners estimated in November that, as of Sept. 30, there were 20 million Alexa-enabled devices in U.S. shoppers’ homes, up 33.3% from 15 million at the end of June. Those numbers dovetail with Internet Retailer’s survey, which found that 29.3% of consumers are considering purchasing a smart speaker within the next six months. Those findings suggest a large number of consumers may be interested in interacting with a retailer’s Alexa skill.

As the retail landscape rapidly shifts, the retailers that sort through the technological tools to find those that their customers want are bound to thrive, while those that don’t may get left behind.

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zak@verticalwebmedia.com
@ZakStamborIR