Customer service is evolving: is the future bright?

Ecommerce competition is fiercer than ever, but there’s one area that businesses of all sizes can leverage to ensure they retain and grow their shopper base: customer service.

We all know customer service is critical, but it takes a lot of resource to do it well – something SMEs (Small and Medium-sized Enterprises) in particular don’t always have the luxury of. As consumer demands grow and organisations strive for efficiency, many are turning to AI. Can it rise to the challenge and not only direct customers to the right answer, but be emotionally intelligent too? Or is there another answer for busy businesses?
 

Great expectations…

Today’s consumers are digitally-savvy and service-focused. 39% of UK online shoppers would choose one retailer over another for excellent customer service,¹ so clearly it can be a key differentiator. Particularly for SMEs: online shoppers generally think smaller businesses have better customer service than bigger retailers.²

But despite its importance, great customer service is still proving to be a challenge. In 2024, the Institute of Customer Service’s UK Customer Satisfaction Index revealed that satisfaction had fallen to its lowest score in 14 years,³ which by January 2025 had only improved by a tiny margin (0.3 points).⁴

Clearly more needs to be done to appease consumers, but every business must balance their commitment to great service with profitability and efficiency. So…
 

…Is AI the answer?

As of 2025, 59% of leading UK retailers now use chatbots as a first-wave customer service option.⁵ And 33% of UK retailers said they would expand the use of AI to enhance the post-purchase experience, like addressing ‘where is my order’ enquiries.⁶

Shoppers are starting to become more open to robot intervention too: 27% would like retailers to use AI to make their shopping experiences more convenient.⁷ Customers are more likely to feel that retailers’ use of technology in customer service has improved in the last year, but many are uncertain or cautious.⁸

AI assistants like chatbots can help to manage end-to-end customer journeys, from answering initial shopper FAQs to supporting the entirety of the buying journey.

But chatbots are rapidly becoming more sophisticated, moving beyond answering simple queries to handling complex tasks, such as troubleshooting technical issues, processing returns, or providing detailed product information. With improved natural language processing and machine learning over time, bots will better understand nuanced queries and context, allowing for more natural and fluid conversations.

For example, AI systems will become more capable of detecting frustration or confusion in a customer’s tone and shifting to a more apologetic approach. Or offer “cool-down” periods for customers expressing high emotion, giving them time before re-engaging. But is implementing this practical for small businesses?
 

How can SMEs best utilise AI?

In 2024, while 25% of SMEs had implemented AI, the majority still had no plans to use it – despite 42% agreeing it would increase productivity overall.⁹ Though there are many reasons for the hesitancy, cost implications are a likely factor.
 
Long wait times, repeated calls or emails and agent transfers frustrate consumers. So simple AI-powered solutions like virtual assistants, chatbots, and intelligent call routing help to improve satisfaction, and empower consumers while reducing a strain on service teams. When provided by existing cloud-based tools rather than being custom-built, these systems can now be affordable to implement, while offering cost-saving opportunities and 24/7 availability.

Complex language learning models that create more nuanced responses are more costly, so are likely a longer term goal for small businesses that already use other AI applications.

Smaller organisations could also use AI to personalise product recommendations for customers by analysing past behaviour, which can make a shopper feel more valued and satisfied. Or to analyse trends of customer needs from social media engagement, which could lead to longer-term consumer satisfaction overall. As AI has become more popular, many of these tools are now available without prohibitive costs on a ‘pay for what you use’ basis.

But there is one extra factor that makes AI particularly interesting for small businesses…
 

AI efficiency vs the human touch

The Customer Satisfaction Index identifies which factors show the strongest correlation with high levels of customer satisfaction: emotional connection and perceptions about an organisation’s customer ethos, care for customers, openness, transparency and reputation.¹⁰ It’s no surprise that these are softer, innately human factors, that all require emotional intelligence and a personal touch to fulfil.

In fact, only 31% of online shoppers agree that chatbots provide good customer service.¹¹ Maybe this is partly down to AI’s lack of empathy, which customers are often seeking when they enquire.

So the key is a joined-up human-AI customer service function: with AI as the always-on front line, seamlessly escalating to real humans whenever necessary to supply the emotional intelligence and nuance that creates truly great service. This may be the perfect cost-saving balance for small businesses: simple and affordable AI systems, backed up by a reduced team of people.

The future of customer service is a hybrid one: combining the efficiency of AI with the empathy of human team members. Smaller businesses can meet rising expectations and foster meaningful relationships with customers; while still keeping pace with our changing world.

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Footnotes

¹ Mintel Consulting: Online Retailing Report 2024. Research conducted with online shoppers.
² Mintel Consulting: Online Retailing Report 2024. Research conducted with online shoppers.
³ The UK Customer Satisfaction Index (UKCSI), Institute of Customer Service (July 2024)
⁴ The UK Customer Satisfaction Index (UKCSI), Institute of Customer Service (January 2025)
⁵ “Chatbots are now dominant. To make them better, get your data in order”, RetailWeek (March 2025)
⁶ “AI in retail delivery and post-purchase”, Scurri / IMRG (2024)
⁷ “The Fastest Way to Lose Consumers”, Retail Week (October 2024)
⁸ The UK Customer Satisfaction Index (UKCSI), Institute of Customer Service (January 2025)
⁹ Employment Trends Report, British Chamber of Commerce / Pertemps (July 2024)
¹⁰ The UK Customer Satisfaction Index (UKCSI), Institute of Customer Service (January 2025)
¹¹ Mintel Consulting: Online Retailing Report 2024. Research conducted with online shoppers.