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Retail Tech Case Study: How Chaayos improved customer retention by 20%

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With the help of generative AI, tea chain Chaayos was able to improve customer retention, increase revenue and enhance the experience

New Delhi: Founded in November 2012 by Nitin Saluja with a passion to experiment with tea, Chaayos is a contemporary interpretation of the ‘chai adda’ or tea room. As of July 2022, the home-grown tea-café chain had about 200 stores across India and according to its website, chai at Chaayos can be personalized in 80,000 ways.

chai at Chaayos can be personalized in 80,000 ways
Chai at Chaayos can be personalized in 80,000 ways

Sunshine Teahouse Pvt. Ltd. known as Chaayos launched its first café at DLF Cyber City and three years later in 2015, it started ‘hot chai delivery,’ making it the first company in the country to start chai delivery through innovative kettles, according to the company’s website.

Later that year, in October 2015, the home-grown brand launched its first café in Mumbai in Bandra West, and currently, it has 22 cafés in the city. Four years later in September 2019, Chaayos launched its first café in Bengaluru and three years later in August 2021, it celebrated the launch of its 100th café at Cyberhub in Gurugram (Delhi NCR).

Not even the pandemic was able to halt the brand’s expansion plans as it opened its cloud kitchen in Pune in September 2021 during Covid times.

Ten years after its inception, the tea-serving brand celebrated the opening of 200 cafés across the country with the launch of its Jayanagar Café in Bengaluru in July 2022. Now, it aims to have 400 stores by next year and 1000 cafés within 2-3 years, with plans to enter new cities, including Hyderabad and Kolkata.

Retail Tech Case Study
After three years of research, Chaayos launched Chai robots called ‘Chai Monks’ to brew a consistent cup of chai, and that’s how the home-grown tea-café chain took its first step towards technology and called it ‘Tech wali Chai.’

Stepping further into the technology era to cope up with other artificial intelligence (AI) enabled brands and to adapt to the changing consumer behaviours and preferences, Chaayos turned to generative AI to enhance several aspects of its business.

The need
The national tea chain Chaayos wanted to enhance its top line and bottom line with AI. It also sought to focus on improving its omnichannel experience for consumers.

Retail Tech Case StudyApproach
To achieve the above; Chaayos adopted Generative AI in various customer-facing areas, including its POS (point of sale) and mobile application. It also worked on its loyalty program. Here’s what all Chaayos did with the help of AI.

  1. AI-enabled POS system with a recommendation engine with an aim to achieve faster payment settlement with accurate day close.
  2. Integrating AI into its contactless dine-in/ordering app, ‘Chaayos India,’ available on Play Store and App Store.
  3. Installation of display screens at cafés that used generative AI to show dynamic automated menus with dynamic pricing.
  4. Revamp of the app to enable seamless order processing with end-to-end order tracking.
  5. Facial recognition for faster guest check-in and payments at stores.
  6. Dynamic offers for real-time demand generation.
  7. No-nonsense earn and burn loyalty program to enable high repeats.
  8. Dynamic small value wallet top-ups to generate real-time savings for customers and aid in customer repeat rates.
  9. Dynamically generated menu across channels to enable high menu relevancy for every part of the day (morning, afternoon, evening and night).

In addition, Chaayos also used Generative AI for text-to-image, in-house CLM (Contract Lifecycle Management) for recommendations, supply chain management and cold chain logistics.

According to Chaayos, everything was developed in-house using open-source technologies with limited documentation of generative AI available online as it is the latest technology and hence a slow learning curve. Chaayos spent Rs 1.5 crore to implement AI in its business with a payoff period of two years.

Retail Tech Case Study Business impact
In the first month of the implementation of generative AI, Chaayos’ customer retention improved by 20% and its revenue grew by 14%.

Apart from this, the home-grown tea chain also witnessed enhanced customer experience and its repeat order rates went from 2.6% to 3.5% per user. Its customer ratings increased from 3.9% to 4.3% across all channels and average sales per cheque increased by 8%.

Conclusion
According to Chaayos, generative AI is a game-changing technology because of the impact it created on the business and customer experience. To sustain the benefits realized by the implementation of this technology, the company will work on constant improvement and regular updates of algorithms and it further plans to work on text to image, text to video and other generative AI tools to keep improving customer experience.

Retail Tech Case Study on Chaayos

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