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Alexa: Reinvent My Shopping Experience

From voice-based assistants to the demise of brands and new delivery models, the future of retail is undergoing a seismic transformation

2017 brought many new changes in the retail landscape, from Amazon’s acquisition of Whole Foods to the nearly endless announcements of chain store closings. But this is truly just the tip of the iceberg. The future holds great change in every manner, from technology to the cultural aspects of shopping—and retailers are scrambling to get ahead of consumer demands with strategic investments.

As we look into our crystal ball, the next retail battleground will be for ownership of intelligent digital assistant relationships. Voice-based shopping is in its infancy. Consumers are currently using devices such as Amazon’s Echo for listening to music, timers and for jokes, but these devices are really designed for commerce.

Amazon’s recent update to Alexa allows her to distinguish between different voices in the same household—the first shot across the bow in this coming battle. By 2030, consumers will have a personalized digital agent that can do all shopping based on highly individual preferences.

“The big four” among technology companies are planning to spend $1 trillion or more to corner this voice-based shopping opportunity as each one tries to be the provider of technology for the 2020s and beyond. They are coming at it from different tracks but the goal is the same; be the first stop or own the tracks of the world.

Amazon has commerce virtually sown up with more than half of transactions online in its ledger. The company is making strong inroads in entertainment and technology, and with 50% of CPG searches starting on its search bar it is giving Google a good battle to stay the king of search. Amazon also has virtually every household in the western world above $100k a year under the Prime umbrella and is growing new customers like weeds by giving Prime away to college kids.

But Amazon needs to own the customer, and more importantly the data on the customer, from soup to nuts to keep ahead of the platform companies. Its three primary competitors all have formidable strengths. Google owns the search and the advertising. Apple owns a lot of the hardware and “what’s cool.” Facebook owns the screen time (and our lives).

All of them need to take away from the others in order to reach the order of dominance they want (or to keep it in Google’s case); and they are all public companies whose shareholders will demand growth over the next decade, which will have to come from the other big guys.

Brands under assault

All four share the ultimate goal of removing brand from the conversation. Brands are being assaulted from retail partners and from third parties that manufacture products on their behalf. Online retailers, such as Amazon and its Echo device that can respond to voice commands, are in an enormous position of power, speaking directly to consumers. This enables retailers to sell their private-label products, resulting in higher margins. We’ll see this trend continue, especially for “replenishment” items, such as batteries and paper towels, as consumers tell Alexa to “order toilet paper,” while brand value is removed from these product categories.

As retailers continue to erode the decades of time and billions of dollars that brands have spent to build loyalty, we may see another model emerge to help level the playing field. Amazon, for example, may expand its targeted test advertising opportunities on Echo, further injecting brand names and promotions into Alexa’s talk-track. As shopping moves from scrolling through visual pages on a mobile device or computer screen to audio-based interactions, brands may be hungry for exposure with consumers at the point of decision-making.

Another significant shift on the horizon will occur in how consumers experience the check-out process. Amazon Go is already moving from “checking out” to “checking in,” decoupling the transaction from the shopping experience in brick-and-mortar locations.

At ShopTalk this year, a roundtable with leaders from Amazon, SamsungPay, PayPal and commercial banks discussed how credit cards are “dumb,” and how new electronic payment methods will likely replace plastic. Through a smartphone-based mobile wallet, consumers will instantly receive intelligence that fuels informed buying decisions. “Do I have the money for this purchase?” “If I finance this, what would my payment be?” When retailers and financial institutions couple transparency with highly personalized information, consumers will have more options, creating a unique, informed choice for each purchase decision.

The future of stores

Delivery, the final stage of the shopping experience, may also change in the future. Five years ago, consumers were still visiting brick-and-retail stores in enough mass to justify large locations. Three years ago, curbside pickup made us question how much retail space was actually needed. Today, and moving forward, online shopping and rapid shipping options are raising the question of how many consumers are interested in continuing the in-person shopping experience, and how much real estate will be required to accommodate these buyers.  Today, there is 1,000 square feet of retail real estate for every human being in North America. It’s simply not a sustainable model as online shopping and rapid delivery are clearly the path of the future.

To some degree, this is a generational shift. Between Millennials and Generation Z, nearly 50 percent of consumers were born after 1985. And by 2023, 40 percent of consumers will be born after the year 2000. Since these future shoppers were raised in the era of online, mobile-first shopping, the current form of in-person shopping is becoming less popular.

Retailers will need to change the shopping experience, through technology and experiential environments, to meet the needs of younger consumers who enjoy shopping in the physical world, buying directly from social media and interacting with stores via text. A current example of experiential shopping can be seen with innovations like Bonobos guide shops, the Lego VR experience, and with REI providing in-store lectures and films. In these environments, the transaction is separated from the shopping experience, with retail locations serving as a place to experience products, brands and interact with like-minded individuals.

Beyond in-person shopping, retailers are battling for customers over fast and free shipping options. But how will retailers handle delivery costs in an attractive way without losing their shirts? Free two-day shipping for everyone is immediately attractive to consumers, but not a sustainable model in an area as geographically diverse and large as the U.S., and even less so in countries with more sparsely distributed populations, such as Canada and Australia. In the next decade, a more tiered delivery model will emerge, offering fulfillment times ranging from 30 minutes to 10 days, with different cost structures.

Again, voice-based front-end devices such as Alexa will play a key role. The consumer may need to receive batteries right away, but the 50-pound bag of dog food can arrive anytime in the next week. Articulating these needs to the digital voice assistant can save considerably on shipping costs. Retailers offering free, fast shipping today may find themselves struggling to make money in the coming years unless they adapt their policies appropriately.

Business school students in the 22nd century will be writing about the significant landscape transitions happening right now. From the infancy of voice-based assistants to the demise of brands and new delivery models, we’re at a critical time in the re-invention of shopping. We look forward seeing how the retail landscape further evolves as we come closer to the Jetson’s vision of instant gratification from selection to delivery.

Source

Digital Commerce 360

Publish Date

January 2, 2018

Authors

Jon Reily, Steve White