How a Chatbot Helped This Vinyl Records Startup Make $1 Million in 8 Months

Chatbots already have a little bit of a bad name. Early reviews for the ones on Facebook Messenger have been rough due to apparent malfunctions, and Microsoft's Tay has been an utter disaster, at least on a couple of occasions.

But a startup called ReplyYes, which offers a text-to-buy system for retailers, provides a glimpse into the potential of automated messaging. Interestingly, the company has a pair of e-commerce ventures. One sells vinyl records, the other graphic novels.

The vinyl store, called The Edit, has sold $1 million worth of records since it debuted eight months ago. David Cotter, CEO of ReplyYes and former Amazon.com general manager, attributes much of the site's success to his chatbot technology, which leans on an algorithm that recommends records based on purchase behavior and other interest-level signals. Yet, there's also a human element.

Record Store Day Spurs 131 Percent Gain in Vinyl Album Sales in U.S.

Here's how it works. People sign up to receive text messages and then get an album recommendation every day on their phone. Upon seeing such an offer, they can text back either "yes," "like" or "dislike" to inform the chatbot of their musical preferences -- and the reply affects what 12-inch slabs of wax are pitched their way in the future. If they answer "yes," a link appears to let them buy the album in a couple of clicks. The Edit has sold some 50,000 records that way to tens of thousands of subscribers. What's more, if a subscriber asks a "human question" -- such as, "What is currently playing in the office?" -- a customer service rep quickly steps in and provides a contextual response to further engage the patron. If the consumer seems ready to buy something but hasn't pulled the trigger online, the chatbot -- not the rep -- sends that person a message to call a rep to complete the order.

"Sixty-eight percent of our [subscribers] have purchased," Cotter said. "Twenty-eight percent have purchased six or more albums in their first 180 days [on the mobile platform]."

Cotter described the digital back-and-forth as if it were a scene from High Fidelity.

"It's meant to feel like an experience in a neighborhood record store," he said. "And then it's about, 'How do we take our machine learning and chatbot and build that kind of experience?' We are already selling 300 albums a day because of that [style of thinking]."

ReplyYes' approach differs from what Facebook and Microsoft plan to do with chatbots, making them 100 percent automated. Cotter contended that the hybrid system -- part chatbot, part customer rep -- might be better than any purely digital approach for retailers.

"We've had customers who have invited us out on dates, asked us to parties -- we've gotten Christmas cards," he said. 

Those ideas actually do sound like traditional, record store conversations, don't they?

Meanwhile, Cotter's Seattle-based company last week scored a $2.5 million round of funding from Madrona Venture Labs, Lowercase Capital, MESA Ventures, Ore Ventures, FJ Labs, Bob Nelson, Francois Kress, and Lorne Michaels' investment arm, Broadway Video Ventures.

The article was originally published by Adweek.