Why Everyone’s Talking About Conversational Commerce

German startup Charles recently announced a $20 million Series A raise, which came hot on the heels of a $6.5 million seed round in 2021. These are good numbers for a company that’s only existed a few years, and speaks to a growing appetite for what Charles offers. 

Namely, a conversational commerce platform that has already led to many of Charles’ clients enjoying seven-figure sales revenues through WhatsApp. In some cases, WhatsApp transactions enabled by Charles have accounted for almost half of the companies’ overall sales.

The burgeoning growth of Charles comes amid investor interest in similar startups, and this momentum indicates that conversational commerce will be an increasingly fought-over tech space. So now is a good time to dig deep into the question.
 

The catchy term ‘conversational commerce’ was originally popularised by Chris Messina, the tech consultant who invented the use of hashtags to signify groups and trends on social media. In 2015, he wrote a short but influential piece in Medium which predicted that conversational commerce would be the next big thing in digital sales. 

“Conversational commerce is about delivering convenience, personalization, and decision support while people are on the go,” he wrote. “I expect more service providers will shift in this direction, becoming more subtle in how they integrate into our lives.”

Messina was hailing an e-commerce model where vendors interact with customers (and potential customers) through direct messages – whether that’s through platforms like WhatsApp and Facebook Messenger, old school SMS, or via fully automated chatbots on their websites. 

A few years later, research by conversational AI firm LivePerson seemed to bear out what Messina was saying. It found that 49% of consumers surveyed said they would be more likely to spend time with a brand that communicated through direct messaging, and a striking 96% agreed with the statement that ‘I’m more likely to do business with a company that interacts with me in a personalized way’.

Conversational commerce is already integral to digital sales in some parts of the world. Last year, for example, it was reported that almost $250 billion in sales were made through the Chinese messaging app WeChat. That was almost double the revenues generated the year before. 
 

Though conversational commerce has been going great guns in Asia and Latin America, the market is far from mature in territories like Europe. This is where Charles is hoping to establish itself as a ‘go-to’ for vendors looking to capitalise on the potential of this sales model. The company allows its clients to connect their CRM systems, such as Salesforce and Shopify, with messaging platforms like Messenger and WhatsApp. This means vendors can chat with customers throughout the whole consumer journey. They can answer questions, give recommendations, and provide updates after orders have been made. 

Charles has particularly emphasised the persuasive power of newsletter sent via WhatsApp rather than email. The company points out that newsletters sent this way are far more likely to be opened and read, meaning vendors stand a far better chance of getting the word out when it comes to special offers and product announcements.

Essential to Charles’ ambition to make conversational commerce mainstream in Europe is its adherence to GDPR regulations. The company has implemented double opt-ins with its newsletters, so that customers have to twice confirm they’d like to receive such messages through WhatsApp. Opting out is also possible at any time. 
 

Charles is just one of several conversational commerce startups making waves at the moment. Late last year, LA-based Whym announced $4.3 million in new seed funding, confirming CEO Kelly Nyland’s belief in the potential of conversational commerce. While working at Snap, she realised that “messaging was going to become a really important part of social shopping in the future”, and Whym has built on this insight by turning messaging platforms into shopping hubs.

When browsing the websites of vendors affiliated with Whym, customers have the option to hit a ‘Text Me This Item’ button. Various items from different vendors can therefore be saved in one place, with sporadic reminder texts then being sent to prompt purchases. Customers can buy the items whenever they’re ready, through one consolidated checkout. Whym points out that this system streamlines the shopping process and minimises cart abandonment.

Earlier in 2021, another commercial commerce company, Yalo, raised $50 million in funding – an impressive figure which reflects the fact that this startup founded in Mexico boasts the likes of Coca-Cola and Unilever among its clients. Yalo’s range of tools include the ability to create product catalogues accessible via WhatsApp, and 
AI-powered chatbots that can automate more than 90% of customer conversations.

Yalo’s CEO, Javier Mata, has made no bones about the fact that Covid-19 ‘fast-forwarded us into the future’ with regards to e-commerce, with vendors now needing to accommodating the requirements of shoppers in a new, post-pandemic age.
 

The jury is still out on whether, to paraphrase Mark Twain, reports of the death of the high street have been exaggerated. But there’s certainly no denying that digital commerce is now absolutely the norm, with take-up accelerated by the pandemic lockdowns. And therein lies the fundamental appeal and importance of conversational commerce.

This kind of technology allows vendors to effectively make up for the lack of human interaction shoppers have traditionally enjoyed in physical stores. What’s more, in an age of extreme competition between online retailers of all stripes, conversational commerce can be a crucial way for brands to differentiate themselves and assert their own voice. 

It’s fair to say that Chris Messina’s prophecy, written back in the dim and distant days of 2015, has already come true. We’re sure to see increasing numbers of conversational commerce firms garner investment and become the target of M&A deals as we continue to embrace new ways to buy and sell across the globe.