Negotiating prices in person just isn’t done, but there are different rules online.
Earlier this year, shoppers who visited makeup brand Iconic London’s website received a surprising message from the site’s chatbot: did they want to pay less for the tube of lip liner they just put in their carts?
Iconic London, whose products are sold in Sephora and Ulta stores, sent the message to half its shoppers during a weeks-long test to see if they were interested in negotiating for a lower price on the items in their cart. While the bot was secretly authorized to extend average discounts of 15%, most customers who engaged accepted discounts in the single digits. Average order values jumped by 50%.
“What this taught us is it might not be necessary to offer a blanket discount,” Katherine Loftus, Iconic’s global digital director, told Forbes.
Iconic London is one of more than 300 brands and retailers who are using Nibble, an AI-powered chatbot that gives shoppers the option to haggle for lower prices. Shoppers can reach a deal within 45 seconds, the company said, and roughly one-fifth go on to purchase that item.
“It seems like shopping in an Egyptian bazaar,” said Sucharita Kodali, an analyst at Forrester. “There are segments of the population who love this.”
Some retailers are trying Nibble to see if it offers an off-ramp from the rampant discounting popular across the industry. Discounts, which faded during the pandemic when retailers were able to leverage supply chain shortages to sell more items at full price, are back in full swing. Retailers that initially had too little inventory later got stuck with too much of the wrong sorts of products and had to put them on sale. Customers, long bombarded with discounts, have grown accustomed to them.
“Most of the retailers we speak with call it the race to the bottom,” Rosie Bailey, Nibble’s cofounder and CEO, told Forbes. “The idea that once you offer a discount, everyone expects a discount, and then a deeper discount and a deeper discount. You find yourself on this treadmill of sale periods.”
Negotiating Over Sneakers
Nibble was started in 2020 by Bailey and her cofounder Jamie Ettedgui, who visited a market in Istanbul and haggled with a seller over a pair of sneakers. They enjoyed the experience, but realized it just didn’t often happen at home in the U.K., where most people viewed negotiating as impolite. The last bastion of acceptable back-and-forth over price is probably the car dealership.
“When you come into our store and see a stool for $800, it’s rare to find someone who will ask, ‘Can you do it for $700?,’” said Ian Leslie, the chief marketing officer at Industry West, a furniture company based in Jacksonville, Florida that uses Nibble. “It just doesn’t happen in person.”
Nibble is betting that more shoppers feel comfortable doing it online. The startup, which takes a 2% cut of sales, has raised more than $3 million in funding and been deployed by brands that sell everything from jewelry and clothing to furniture and car parts. Half of its customers have signed on this year. The company regularly consults with a negotiation professor at London Business School, Niro Sivanathan, sending him failed chats and asking what Nibble should have done differently.
It has found that some retailers use Nibble to get rid of unwanted inventory in a quieter way than broadcasting big sales to all of their shoppers. Others are using it to boost conversion rates or persuade customers to add more items to their cart in a targeted manner that doesn’t ruin margins. Each retailer sets the parameters for the chatbot, giving it leeway to offer certain discounts or perks like free shipping to land a sale.
“The hope is they get a sale they wouldn’t have gotten otherwise at a price they wouldn’t have gotten otherwise,” said Kodali. “Instead of having to give a blanket 30% discount to everyone, they instead give a 20% discount to one person who’s ready to buy.”
Option To Haggle
Industry West now gives customers the option to haggle with Nibble on about three-quarters of its products. Directly below the button to add an item to the cart there’s another button where customers can negotiate price via chatbot. A third of the shoppers who chat with Nibble come to an agreement on price, with the average discount slightly below the standard 20% it offers when a shopper abandons their cart.
“We see people have fun with it, joke around with it and sometimes get angry with it,” said Leslie.
Other brands are opting to have the Nibble chatbot appear only after a shopper has been lingering on a page or they’re on their second visit to the site. Iconic ran a test where it emailed customers who hadn’t purchased anything in the last year and asked if they wanted to come back and negotiate for a lower price.
Capsuline, which sells empty gelatin capsules to pharmaceutical companies, turns Nibble on when its salespeople in the U.S. go home for the day. That way it can still negotiate pricing and capture sales from customers overseas.
Next month, Nibble says it will add generative AI functionality to make the chatbot more conversational. Brands can train it to speak like one of their salespeople to tout their selling points.
Yet, at the end of the day, it’s still a bot, Bailey said. “If you don’t receive a deal, you’re not embarrassed.”
Read the full article here