Private domains: From talk to transaction

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  Quantumrun Foresight
• October 4, 2024

Insight summary

Chat commerce is transforming how businesses interact with customers by using messaging platforms for real-time, personalized transactions. This trend could lead to faster purchasing decisions but raises concerns about impulsive spending and privacy issues. Companies may need to invest in artificial intelligence (AI) tools, and governments will likely update regulations to ensure secure transactions and data protection.

Private domains context

Private domain commerce, also known as chat commerce, is a growing trend in which businesses conduct transactions and offer services directly through private messaging platforms. Unlike traditional e-commerce, which relies on public domains such as websites and social media ads, chat commerce uses platforms like WhatsApp, WeChat, and Telegram to create a more personalized shopping experience. 

This approach allows companies to build stronger, more direct customer relationships, offering real-time support, personalized offers, and seamless transactions. In China, platforms like WeChat are particularly popular for this purpose, offering a comprehensive ecosystem where businesses can maintain direct communication with customers while managing marketing, sales, and payment processes.

Advancements in AI and messaging technology are fueling the rise of chat commerce, enabling businesses to enhance customer engagement through chatbots, live chats, and voice assistants. Clickatell, a US-based company, is one of the leaders in this space, developing chat platforms that streamline customer interactions and drive revenue growth. The company pointed out that the growing user base of messaging platforms such as WhatsApp, now with more users than the internet itself, shows the immense potential of chat commerce.

Major brands across various industries are already adopting chat commerce to drive engagement and sales. In particular, South Africa is becoming an emerging market for private domain commerce. For example, Retailer Dis-Chem enables customers to order prescription medication via WhatsApp, helping streamline purchasing and improving adherence rates. Meanwhile, FlySafair, a local airline, uses chat commerce to enhance customer service by integrating WhatsApp for booking and real-time updates. 

Disruptive impact

With services becoming more available through messaging apps, people may expect immediate, personalized responses. This shift could reduce the time spent navigating traditional online stores and allow quicker decision-making. However, it may also lead to impulsive spending, driven by the ease and convenience of these transactions. Moreover, increased data sharing between users and platforms could raise privacy concerns, especially as chat commerce relies on collecting personal preferences to tailor recommendations.

Businesses may need to invest in advanced chatbots and AI to handle customer inquiries and transactions efficiently, which could reduce the need for human staff in customer service roles. The demand for seamless integration of messaging apps with inventory, payment, and delivery systems could lead to higher initial costs but might boost long-term customer retention. However, companies may face risks from cyberattacks and fraudulent payment links, which could harm customer trust.

Meanwhile, policies on data protection and consumer rights may need to be updated to ensure that individuals' information is secure and businesses are held accountable for breaches. Governments may also explore ways to regulate cross-border payments and transactions, particularly in regions where chat commerce could increase the volume of international trade. In addition, investment in digital infrastructure, such as secure payment networks, may be a priority to support this growing trend. 

Implications of private domains

Wider implications of private domains may include: 

• A shift in consumer behavior toward more instant and personalized transactions through chat commerce, increasing expectations for real-time interactions with businesses.
• An increase in small businesses using chat platforms for direct sales, reducing their dependency on large e-commerce marketplaces, and creating a more decentralized economic landscape.
• New regulations on chatbot usage and AI-driven commerce, leading to stricter rules on transparency and customer consent.
• More data-driven strategies to track customer conversations, improving product recommendations and sales forecasts but raising concerns over consumer data privacy.
• Less physical retail space due to increased virtual transactions, potentially leading to shifts in urban planning and commercial real estate use.
• A rise in remote, digital customer service jobs as businesses transition from call centers to chat-based support, reshaping the labor market in specific sectors.
• More energy-efficient data centers as chat commerce grows, reducing the environmental footprint associated with online transactions and AI operations.
• Demographic shifts as younger generations, more accustomed to messaging platforms, drive increased adoption of chat commerce, influencing how products are marketed and sold.
• Increased economic participation from regions with limited internet access but strong mobile messaging usage, as chat commerce bridges the gap between local markets and global businesses.
• The potential for social isolation as more interactions with businesses occur through chat, reducing the need for in-person communication.

Questions to consider

• How is chat commerce changing how you shop and interact with your favorite brands?
• What privacy concerns might arise from businesses collecting your personal data through messaging platforms?