2021 REPORT Conversational Commerce The real Commerce for the mobile era yalochat.com Table of Preface BCG Pg. 03 Contents What questions did we want to answer? Pg. 04 What were our key findings? Pg. 05 Chapter 1. Let’s define conversational commerce and related concepts Pg. 07 Chapter 2. The apps we prefer are the messaging apps Pg. 21 Chapter 3. There is a huge economic opportunity Pg. 26 Chapter 4. What are the benefits of c-comerce? Pg. 34 Chapter 5. How to leverage the benefits of c-commerce? Pg. 51 Chapter 6. c-commerce today Pg. 56 Success stories Pg. 60 The Power to Transform Entire customers and consumers and, therefore, more assertive products, messages and promotions to this segment. Industries in Emerging Markets This is because c-commerce is a great enabler of easy online buying and By: Joel Muñiz, Managing Director selling. It allows electronic transactions to happen right now, without the & Senior Partner BCG México need for shoppers to change their devices or improve their technology skills. This trend makes it possible for what would otherwise have taken Since the invention of the Internet, much has been said about its power to decades with traditional e-commerce to happen today. Preface BCG shorten or eliminate distances and build communities. However, over the years we have seen how there continue to be major challenges when it It has been observed that c-commerce users tend to increase their comes to digital penetration and inclusion, particularly in emerging e-commerce spending. But the most relevant aspect of markets. The lack of access to the technology and know-how needed to c-commerce is undoubtedly that it has become the gateway to digital use applications/devices limits the number of people benefiting from commerce for millions of consumers: ~40% of c-commerce users in technology and widens the gaps. Traditional e-commerce has faced emerging markets made an online purchase for the first time in their lives. similar challenges, such as lack of trust in vendors, unclear pricing and long response times According to our estimates, c-commerce will grow at a rate of between 10-18% per year over the next 5 years. However, there are economies In this context, c-commerce or Conversational Commerce, whereby people where it will grow at rates of over 20%. make online purchases using conversational means such as instant messaging applications and/or chat rooms, is particularly powerful. In this growth path, companies like Yalo, together with their customers, are Because it acts as a bridge between the personalized contact of the paving the way and leading this process of digital inclusion. That's why we physical world and the convenience of the digital world, c-commerce has consider this report to be of great interest. It analyzes in-depth the shown it can incorporate segments traditionally excluded from the digital importance of conversational commerce, the way it has been used so far, strategies of large companies. and the great potential it has to continue transforming how people interact with large companies, governments and public entities. Thanks to c-commerce, better digital inclusion is promoted across all segments. With just a WhatsApp message, today the owner of a small In this way, c-commerce could help fulfill many of the promises of store in a remote village in Brazil can order supplies, a waiter in India can convenience and inclusion originally made by e-commerce. One letter may request a bank loan, and a cell phone salesperson can continue to advise seem like a small thing, but when it involves a whole philosophy of putting their customers in Mexico. the customer at the center, the change is enormous. And this is the change that Conversational Commerce is advancing. This avenue of business has the potential to connect the traditional channel with large companies, thus achieving a better understanding of Pg. 03 Table of Contents retailers and consumers and, therefore, a better understanding of their What questions did What is c-commerce? we want to answer? Is it worth focusing on messaging applications? How big is the market and the potential of c-commerce? What are the benefits of c-commerce for businesses? How are companies currently implementing c-commerce? What is the best way to leverage these benefits? Pg. 04 Table of Contents yalochat.com What were our key findings? There is a huge market opportunity It can be found in every market C-commerce is predominant in Asia, where Currently c-commerce is a US$35 billion is it expected to increase by 40% within the market, given that in some countries it is the next 5 years.The greatest growth potential predominant mode of digital commerce, is in Latin America, where e-commerce still accounting for 60% of e-commerce. In faces significant barriers, which leaves the emerging markets c-commerce has the way open for c-commerce. potential to reach US$130 billion by 2025, but only through adequate investment. Pg. 05 Table of Contents yalochat.com What were our key findings? c-commerce is happening It's good for business on all types of platforms C-commerce facilitates connecting with new Both in messaging applications and social users, increases the average ticket media (50%) and in e-commerce and business of current digital commerce users by up to websites (50%). 3.9x and is the sweet spot between the offline and online experience. Pg. 06 Table of Contents yalochat.com CHAPTER 1 c-commerce is the business that happens within messaging applications and is, therefore, the bridge between the physical Let's define and the digital world In c-commerce, every conversational commerce communication made within messaging applications has and related concepts a business impact In c-commerce, the benefits of offline sales are combined with those of online sales Pg. 07 Table of Contents yalochat.com c-commerce or conversational commerce The process of acquiring goods and services through messaging apps Pg. 08 Table of Contents yalochat.com How did it come about? Pg. 09 Table of Contents yalochat.com c-commerce makes all mobile apps’ dreams come true: fast, easy access, collaborating in real time and in an instantaneous context Pg. 10 Table of Contents yalochat.com Currently, developing and promoting apps is expensive. % still use the app They also have a big problem: 100% On average, people stop using 7 out of 10 apps within three months 43% 33% 29% Month 0 Month 1 Month 2 Month 3 *Source: Localytics 2019 Pg. 11 Table of Contents yalochat.com The apps we do use Most used apps: are the messaging ones. 1. WhatsApp → 2B 2. Facebook 3. Facebook Messenger → 1.3B Thus: 4. WeChat → 1.2B We chat more 5. Instagram than we talk 6. TikTok 7. Allpay 8. QQ → 648 9. Taobao 10. Baidu Source: Localytics 2019 Pg. 12 Table of Contents yalochat.com c-commerce is the next step in the evolution of trade B&M Website Apps Conversational Before the 1990s 2000s 2010s apps 2020s Requires people to go to Almost unlimited product Highly functional on the physical store inventory high-end mobile devices, Users have the app before getting in but little on midrange and touch with the brand Limited amount of products Very low or zero low-end mobile devices personalized attention Brands can develop mini Personalized attention Great friction in the conversational apps within Less functional on mobile downloading process messaging apps devices Users don’t need to learn how to use a new app Pg. 13 Table of Contents yalochat.com How does c-commerce work? Pg. 14 Table of Contents yalochat.com This is what the purchasing process looks like through messaging apps PRE PURCHASE PURCHASE POST PURCHASE SEARCH EVALUATION Physical channel Conversational Commerce Next, visited website Discussed the price of Confirmed option of Requested bank details Received confirmation Need: look for casual of “ZapatosMX” what they wanted payment on delivery of payment... shoes for office / on Instagram weekend wear End of conversation Visited the online store Lifestyle & Shopper, but did not like anything. Liked the design Reconfirmed cost and ...and estimated of a pair of boots delivery process delivery date found while browsing the website Pg. 15 Table of Contents yalochat.com Even when the purchase is not made, the communication in the messaging app has an impact. We call this: Conversational Influence Conversational Influence Conversational Commerce Conversational influence: The buyer is influenced by the information and attention they receive in the messaging application to make their purchase elsewhere. The buyer begins product research The buyer researches in the messaging on a messaging app and completes app and makes the purchase the purchase in a physical store. then and there. Pg. 16 Table of Contents yalochat.com Conversational influence and conversational commerce go hand in hand Search: Customer contacts Use organic and paid channels to be seen by Conversational influence the business the right people at the right time Evaluation: Provide a pleasant, engaging and relevant Information on the Conversational influence product is shared product browsing experience Purchase Accept payment and confirm Customer buys the Conversational Commerce delivery method produce Post purchase: Product is delivered and Delivery, Conversational influence relationship with customer remarketing is followed up Source: BCG, Report: Conversational Commerce – the next gen of E-com. Pg. 17 Table of Contents yalochat.com It's important to differentiate between c-commerce and social commerce SOCIAL COMMERCE CONVERSATIONAL COMMERCE Social commerce is where orders are placed through the check-out function in social media. It also takes into account purchasing processes conducted through social media marketplaces.