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How Bots are Revolutionzing E-Commerce: Austin Arensburg


Good morning, everyone. My name is Austin arndt Berg. I'm with scrum Ventures were based in San Francisco. And we're a seed and series a investor. We have two investments in chatbot companies one is - bought which you all may be familiar with and another one is glowing which you also may be familiar with and today I wanted to do a little bit of an exploration actually with the audience here. So I wanted to get some of your feedback the question I had was whether or not chatbots voice Bots have any application in brick-and-mortar retail. We've been focusing for a long time on e-commerce applications, but I'm very curious if the new innovations that we see in retail will include chat Bots. So the first wave as I mentioned really has been focusing on online only experiences.

And what I'm curious about is will the second wave have any application for the physical retail experience when you go into a store will you use chatbots in any form or manner? In order to explore this I took a little walk down Market Street in San Francisco right by my office. So where that Amazon go is located that's actually my office five 75 market and within not even a mile walk of where I work every day are some really interesting retail experiences. Some of them are here in New York. Some of them are replicated here in New York. Some of them are East Coast companies. And what I did is I basically walk through each of these places and I thought to myself is there an application where chat Bots could be useful. So we have a little bit of margin issues here. But Amazon go is the first one I wanted to start off with because Amazon go is the most impersonal experience you can have in retail.

I went to Amazon go on April 29th, and I spent eight seconds in the store. So you can see there's some candy down there on the bottom. I'll write by the turnstiles. I grabbed a piece of candy and walked out. There is no conversation whatsoever and compare that to the bodegas that you see here in New York the little shops and you become friendly with somebody conversation has been completely removed from this experience, which is interesting in some ways because actually Amazon knows a lot about me when I walk in that store. They recognize my face my body type the new exactly what I take they give me an itemized receipt but none of that personalization is extending the conversation. So the Melt is a store that you can go and buy a basically grilled cheese sandwiches. They're quite good and similar to a store like sweet greens that you have here in New York City, which I was just at yesterday.

You can order your food in advance. You have an app you have a QR code and all of this is essentially to remove labor and lines and q's. And so the relationship that you have with the store is one based on points and loyalty and speed conversation is slowly getting removed from the actual places where we go to pick up. Our food are processed food. Not just convenience store items like Amazon go. Cafe X. I'm not sure if they're here in New York. Does anybody know of Cafe X is here in New York robotic coffee? Okay, so I'll try and show it here.

This is a little bit cut off but there's basically a robotic arm in this image right here and that robotic arm will grab a cup and through espresso machine or a cappuccino machine will basically make a cup of coffee and deliver it to you. I don't know about you all but I actually like going to my local cafe and having a Relation with the Barista very difficult to have a conversation with robotic arm. In fact, what's really interesting about it is that they have anthropomorphized the robotic arm to do various different gestures to try and create some sort of interaction with the customer. It doesn't really work you basically go there you order your coffee a robotic arm drops it into one of these slots and you grab your coffee and go again the past three businesses that I just highlighted are basically low margin businesses. And so the real value proposition from an investing standpoint is reducing your costs, but is there something else that we're losing as a result? Target has a concept store in San Francisco. And this store they have innovated by basically having objects or different products. I should say with a little bit of digital signage off to the side so that someone can instead of asking a retail clerk. They can just flip through the digital information and gather whether or not they want to purchase the object.

Again, no customer engagement. Really. This is just a method of reducing labor costs. And what about Warby Parker? For those of you have probably been to worry Parker here in New York City. One of the things you'll notice is that the customer service is quite good you walk into the store. They have a chance to talk to you about all the different frames that are there. It is in general a really nice retail experience. But most of the energy and The Innovation that they were doing when they first started opening was really trying to take away the retail store entirely take away all of that conversation by allowing you to basically try on at home.

Now the retail experience that I have in my local Warby Parker is very good, but it doesn't extend after I leave the store so immediately after I walk out. There's no more engagement. There's no more discussion. There's no more discourse. The Apple Store as you all know is a very social place you walk in and there's tons of attendance that can take all the different questions that you have and one of these one of the elements that they've really been pushing obviously is this idea of of pick up right so you can go and you can pick up your object but or your product but at the time when you pick it up you also have a chance to ask a question maybe about an iPad or you know the newest watch and so it's facilitating discussion and discourse. The other thing that's really interesting about Apple is they have been revamping and making some of their Flagship stores to have Community spaces and these Community spaces have educational content workshops presentations. So in the San Francisco flagship store, the first floor is all retail objects. The second floor is a community Gathering space.

And so what essentially apple is showcasing at least to me is a commitment to try to have the users of a Communicate with each other. They're not trying to augment that with any chatbot, but they're just trying to create a space where people can come together and have conversation. So I believe conversations very important for Apple but it's not being augmented through Bots and part of the reason why this can work for something like apple and not for a grilled cheese chain is because this is very high margin business. Another high margin business is bonobos. One of us is a men's sort of Premium clothing shop. And when you walk in there typically very small stores. There's one or two. I think here in New York City and the shops don't have inventory.

So it's almost entirely focused around sort of old-school Taylor discussion where you sit down you have a chance to talk to the retail attendant about the different clothing fabrics and fits and it's a very intimate experience and they don't have a chatbot, but they did follow up with me. After I bought something there with an email just a very simple email that said, how are your products? How are they how they doing? Right and so I use as an example because from a retail brick-and-mortar standpoint the solution for customer engagement doesn't necessarily have to be a chatbot. It can simply be an email and you could either have this automated or you could just if it's a high margin business again, you can have people customizing them. So for is a really good example of a chatbot that I believe is augmenting a very personal retail experience. And the reason for that is because they're their Facebook Messenger bot. They're able to basically set up an appointment where you can come in to Sephora and actually have a makeup artist show you different products. And so the chat bot is a channel by which to push people through the front door to have a real experience with a brand ambassador in this case the makeup artist. So what is a framework that we can look by this? So Walmart has something they call the customer value index.

I had not known about this until I talked to a friend at Walmart, but it was very interesting and this is for their e-commerce business and I think it's something that they recently kind of came up with a framework and they say you need to have it you need to find it display it price it and deliver it and that equation basically equates to how much value the customer can get. And so what I was curious was any elements of this equation can they be applied in some form or another to the brick-and-mortar retail industry and we'll chat Bots have any role at all to play? So I found a few examples not many and I hope that you all can tell me afterwards if there are other examples, but this is Mall of America. I've never been it looks really chaotic and it probably want to avoid it personally but satisfy Labs did a really interesting bot where they basically allow for this find it use case to go back to that wall Mark equation. I just was talking about whereby you can find the different stores create a shopping itinerary for your experience at Mall of America because it's very overwhelming. So again, augmenting that physical retail experience with a chatbot. This is a really interesting application. BevMo is a liquor store. I believe it's only in California, but they developed with the Mars agency and Amazon Alexis kill again the photos cut off here.

So I'm going to explain it you step up onto the floor right in front of this display and you can kick up the Amazon skill and say I'm interested in an Okie or a smoky whiskey of some sort and these little lights will shine on the shelf that that particular product is based. So it's essentially augmenting what this person on the left has traditionally been doing not necessarily we're placing them but helping you make those discuss those discoveries for customer products. So this is again moving back to the framework. I mentioned from kind of Walmart is this is a display it function. This is a way of showcasing products that I think is quite unique. So what are the conclusions, you know in a lot of ways this is kind of a sad conclusion because I actually think that conversation is being meaningfully thoughtfully removed from our retail experiences. There can be an entire lunch break that I could take in San Francisco without talking to anyone. That wasn't how I grew up.

You talked to the store clerks you'd ask questions and maybe that's just the future maybe for these low margin businesses. We're going to be moving to an on demand immediate responsive a place where we just pick up items and walk out of the store like an Amazon go but I do think conversation deserves a role and I think it's probably going to be focused more on. That bespoke high-margin retail business, which I believe will be the only type of retail brick-and-mortar experience that will see in 10 or 15 years because it simply won't make sense to be marketing or trying to even bring Goods to people through anything other than an e-commerce experience in the future. So I sort of outlined three proposals. The first one is I think for folks that are interested in applying their chat Bots to Brick and Mortar. It seems to me like the premium segment is the best one to go towards. I think the tools of the online offline handoff are very important. So I use the example Sephora where you're using a chatbot to essentially hand off to an actual person a brand ambassador in the store.

And then finally, I think there's an opportunity for especially a lot of physical retail experiences. You're often trying to find where something is you walk into a Walmart you walk into a Louis department store in your wondering where exactly is this so there should be some sort of interface with location beacons and other tools that I think will be really valuable and the physical retail space. So I'm going to change it up a little bit. I know usually we open up for questions. I'm actually going to ask you all questions and hopefully someone chimes up because this way I get smarter and it's a bit selfish but is conversation required for in-store retail. Is that something that you all think is valuable what will need to change for Brands to invest in conversation? Why should we care? Does this even matter? Does it even matter that conversation is being taken out of the brick-and-mortar retail experience? And what chatbots have you seen that are innovating in the physical space for retail? So with that I'll finish up. Thank you very much. All right.

All right. Stay right there. See right there. We're lit. Let's do this. We're the ones asking questions. All right, so we're going to do a vocal pole. And if somebody wants to chirpin with an actual comment on it.

Is conversation required for retail stores? Yes or no ready go. Okay. Now we know we've moved past this test and there isn't there's a yes and no raise your hand if you think that it is required in a retail space raise your hand so we can see okay how many people think it's not required. Are you happy with that? I think I think that's that's the general gist of it. Okay, most people value convenience over everything else and we still those that want the conversation. That's okay. Number two. I feel like we're like a big board game or something what will need to change for Brands to invest in conversation.

Now, we can't have it do multiple choice here. So, is there something that you want to test something that that you are thinking that we can get a yes or no on? That's hard for me to think of them as okay how then scratch that who wants to answer this question. What will need to change? All right. Here we go. All right. First one. Here you go. Yeah, I think augmentation is a particularly interesting way where you can actually have it enhance the in-store experience right now.

It just seems like if you were to look at all the different stores I was talking about their first priority is cut labor cost but I think I think I think in the next few years people will start to invest in this space. I just don't see it right now. That's not where the bulk of our and he's going. All right. So what we'll need to change for Brands invest in this conversation in the back. Yeah. How about you sir? I would say public re-examine their organization culture and see where conversations fit. All right.

How about you sir? Say ease of implementation and like context right the like you To an Apple store and your beacon technology knows you're standing in front of iPads versus the iPhone cases shouted out in the back. I'm not going to run back there. Okay. What he said I like this one more on this topic anybody burning desire to talk about what needs to change no burning happening. That's fine. All right. Why should we care any suggestions to do a multiple-choice? Yeah. Yes, exactly.

Right how many people agree that the consequence of losing our Humanity would be a good reason here? Okay, how many people think Bots and augmented could actually improve Humanity? Okay, I like these answers right? Just wondering yes. one and three settings where conversation is required. And also you learn from it. So in the case of Home Depot, I went there. I didn't know the right tool for the job. So I was able to have a conversation with someone. I'm not sure that could happen through a chat box.

That's pretty difficult right Home Depot. All right. What chatbots? Have you seen innovating brick-and-mortar retail shout it out? I only found two examples, so I'm assuming that the group any other examples. Okay, that's interesting and Austin are some Berg Clapper this guy they like you they really like you.



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