Chatbots: Improving Seamless Interactions between Grocers and Centennials

The grocery shopping experience has evolved over the years, and the emergence of the Millennial and Gen Z cohorts has brought about a new set of challenges for retailers. Compared to earlier generations, the more contemporary shopper groups are accustomed to a wider variety and higher quality in their shopping experiences. Time is a precious commodity for them, and they are sophisticated in their information filtering.

The rise of these shopping groups in the US market has prompted retailers to adapt strategies to meet the evolving demands of these consumers. Gen Z, or Centennials, are poised to become the largest cohort of consumers in the US market by 2026, surpassing the Millenials with a projected 82 million individuals. As the first generation born into a fully digital age, Gen Z has a unique perspective on consumerism and brand loyalty. Grocery shopping is no longer just an activity to obtain essentials but has evolved into a community-building experience, where ethical shopping and quality time are critical. 

Gen Zers immersed in technology are also a pivotal generation in the future of artificial intelligence in retail. Interacting with digital devices seemingly since birth, these consumers demand comprehensive information about products including their ingredients, nutrition, origins, and other details influencing their purchasing decisions.

In response, retailers have adopted conversational AI chatbots to provide customers with personalized and seamless shopping experiences.

In research conducted in 2019, 86% of US consumers preferred to interact with a human agent, and 71% were less likely to use a brand if they did not have human customer service; however, the impact of COVID-19 increased digital sales, labor shortages, and supply chain constraints, and prompted a shift in consumer attitude towards the emerging technology. In 2023, 62% of consumers prefer to use a customer service bot to answer their questions, as chatbots resolve queries instantly, saving time.

For Millennial and Gen Z shoppers, customer experience is critical, and any delay or inconvenience in meeting their expectations can affect brand loyalty. Adopting AI chatbots has helped retailers build a reputation and customer retention by offering seamless shopping experiences.

‍Experiencing the Power: Conversational AI Chatbot 

A chatbot is a software specially programmed to initiate a conversation and interact with users. A conversational chatbot utilizes AI and machine learning to learn and mimic human conversations and eventually have human-like conversations. In grocery, these chatbots can assist consumers in ordering, accessing product information, and resolving queries. In addition, the bots can connect customers with the store to resolve any issues or concerns that are beyond their capabilities. By utilizing this technology, grocers can resolve customer inquiries faster, fueling brand loyalty and driving sales.

Grocers that adopt AI chatbots can understand consumer expectations and situations and determine the next best solution, whether providing product alternatives or helping to complete an abandoned cart. 

One of the first grocery chatbots was developed by Whole Foods Markets in 2016. The Tully chatbot was amongst the first to help customers find recipes, access product information, and place orders. The advancement in cloud technology, artificial intelligence, and machine learning has accelerated the adoption, and many grocery retailers have developed and integrated AI chatbots. 

In March of this year, Instacart collaborated with OpenAI, the creator of AI chatbot ChatGPT, to integrate the technology into its products. The integration will enable Instacart’s customers to ask recipe-related questions and receive shoppable suggestions in return. Instacart would be one of the first companies to integrate OpenAI’s capabilities into its product systems, and the feature is expected to roll out later this year.

‍The Future Roadmap for Grocer Chatbots 

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AI technology is consequential for the future of grocery retail; today’s shoppers are primarily digital natives who prioritize online shopping. There has been a 47.2% increase in average basket size for digital orders from 2022 to 2023, reports Grocery Doppio. Moreover, Centennial shoppers are likely to increase their share of wallet dollars spent on grocers who offer convenience and time-saving quality solutions. 

One of the most significant AI use cases for grocery retailers has been the use of chatbots which has accelerated with recent advancements in large language models (LLM). Grocery Doppio's February 2023: State of Digital Grocery Performance Scorecard reports that 82% of grocers believe that adopting AI will be necessary for the future. 

Moreover, 78% of grocers say one of the key ChatGPT/LLM use cases is to improve customer experience. Globally, the chatbot market is poised to grow from $2.9 billion in 2021 to $10.5 billion by 2026, with a CAGR of 23.5% in the US. The anticipated growth is expected to lower operational costs, increase omnichannel customer engagements, and improve customer service efficiency.

Highlighted below are some of the key advantages of chatbot implementation.

Seamless Omnichannel Strategy - Grocers can leverage chatbots to accentuate the performance of every platform the shopper uses. Consumers want their information fast, and effective omnichannel marketing using chatbots can keep shoppers connected and engaged on every platform. Sixty-seven percent of digital shoppers have used social media, live chat, or texting to contact customer service reports Emarketer. 

‍Understanding Market Demand - Conversational AI chatbots monitor, collect, and analyze data and store queries. AI technologies with natural language processing technologies (NLP) can process and monitor customer conversations to understand what customers want, which products provide stress, and which offer delightful experiences. Analyzing these experiences helps grocers understand the demand for their customer base and effectively target marketing campaigns. For example, if a grocer’s chatbot regularly receives queries on organic eggs, a campaign can be launched with information on the difference between standard eggs and organic eggs, explaining the nutritional and price variations.

Saving Costs - Chatbots can resolve multiple queries simultaneously and are available 24/7, resulting in a considerable drop in call volume as most queries can be resolved without human intervention. Research by IBM reports that businesses allocate more than $1.3 trillion annually to handle customer questions. Implementing chatbots can significantly decrease customer support costs by 30%.

‍Happy Customers - A study by Salesforce reports that 69% of shoppers prefer to use chatbots as they have instant responses. Chatbots with advanced capabilities can mimic human interactions and result in less frustrated shoppers. Reduced wait times for simple queries lead to happy customers and an overall improved customer experience. 

‍Personalized Recommendations -  Grocers implementing chatbots can provide hyper-personalized services to customers. Leveraging machine learning and NLP, AI chatbots can ask shoppers about their grocery and meat preferences, suggest local products and alternatives, and build stronger relationships, thereby increasing loyalty.

‍Increased ROI & Sales - Chatbots are an effective marketing channel that promotes customer engagement and lowers customer service costs. Since chatbots process orders faster than customer service representatives, companies can significantly increase the number of processed orders and, as a result, increase sales.

‍Challenges 

‍Security and Privacy - Grocers must keep security in mind when developing and implementing conversational AI chatbots. Vital information about the shopper, including name, phone, and e-mail IDs, are an easy target for hackers. Valuable consumer data must be protected; sensitive customer information not handled securely can cause significant reputational damage, not to mention the economic ramification of a data breach.

‍Nuances of Dialects and Language - To accommodate for the vast majority of shoppers, chatbots should be trained to understand different cultures and languages. Cultural discrepancies in automated answering will also differ due to different language contexts worldwide.

‍Implementation Costs - Chatbots must be integrated with pre-existing systems and databases, which can be costly from both a technology and time perspective. And like all digital technology, it requires maintenance and upgrades to operate effectively and provide accurate responses. 

‍Conclusion

The changing market demographic calls for innovation, and grocers cannot be left behind. Forward focussed and creative grocers committed to cutting-edge technology provide a seamless and memorable customer experience and enjoy client retention and brand loyalty. 

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