The rise of artificial intelligence is reshaping the customer service landscape, leading to significant layoffs and restructuring across multiple industries. In recent months, major companies such as Otto, Allstate, and TikTok have made drastic changes to their customer service operations, citing efficiency improvements driven by AI technology. While AI offers enhanced automation and cost-saving measures, the impact on human workers has been severe, raising questions about the future of customer support roles.
Otto Eliminates 480 Call Center Positions
German online retailer Otto recently announced the layoff of 480 call center employees, with 13 customer service locations set to close by August. The company, which transformed into an online marketplace in 2020, has faced financial difficulties in recent years. In an effort to cut costs, Otto increased its seller fees in 2024, leading to a decline in seller participation. Now, the company is shifting away from traditional customer service models, opting for AI-powered solutions such as automated chat systems, email support, and forums to address customer inquiries. With 700 service employees remaining, the move reflects a growing trend of businesses reducing their reliance on human agents in favor of AI-driven interactions.
AI Takes Over Customer Communications at Allstate
Insurance giant Allstate is also embracing AI to streamline customer service, significantly reducing the need for human involvement in handling claims-related communications. The company now uses OpenAI’s GPT models to draft nearly all of its claims-related emails, ensuring messages are clear, consistent, and free of industry jargon. According to Allstate Chief Information Officer Zulfi Jeevanjee, the transition has improved customer interactions by eliminating confusing language and fostering a more empathetic tone. While claims agents still review AI-generated messages, they no longer write them from scratch, reducing their overall workload. This shift has sparked debate over AI’s ability to replace human empathy in customer service, with some experts arguing that AI-driven communication offers greater neutrality and clarity, while others believe human agents remain irreplaceable in handling complex interactions.
TikTok Restructures Trust and Safety Team
Social media giant TikTok has also implemented AI-driven changes, leading to layoffs in its Trust and Safety team worldwide. Recent reports indicate that employees in Singapore, the Asia-Pacific, Europe, and the United States were affected. The company cited the need for operational efficiency as the primary reason for these cuts, highlighting how AI and automation are increasingly handling tasks once performed by human moderators. This follows previous layoffs in Malaysia, where 481 employees were let go in October 2024 as their manual duties were replaced by AI-powered moderation tools.
The Growing Impact of AI on Customer Service Jobs
The widespread adoption of AI in customer service is accelerating as companies seek to optimize costs and improve response times. AI-driven chatbots, virtual assistants, and automated email systems are replacing human agents at an unprecedented rate. While businesses highlight the benefits of AI—including enhanced efficiency, reduced operational costs, and 24/7 availability—workers face growing uncertainty about their job security.
A survey by the International Customer Management Institute found that 35% of respondents believe AI will reduce hiring needs in customer service, while 38% think its impact will be minimal. However, cases like Otto, Allstate, and TikTok suggest that AI-driven transformations are already leading to job cuts across industries.
Ethical and Economic Implications
As AI continues to reshape customer service, companies must navigate the ethical and economic challenges that come with workforce reductions. While AI enhances efficiency, there is a growing concern about the loss of human jobs and the quality of customer interactions. Some companies, such as Nationwide, maintain that human agents remain essential for delivering empathy and personalized service, whereas others are shifting almost entirely to AI-based interactions.
The debate over AI’s role in customer service is far from settled. As businesses continue to adopt AI-driven solutions, the challenge will be to strike a balance between technological advancements and the human element that remains critical to effective customer support. The future of customer service may not be fully automated, but it is clear that AI will play a dominant role in shaping its evolution.
