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What’ll you have, Alexa?

Smart devices are deciding what products we buy



• It all looks so easy in the advert. A woman gets home from work, goes into her kitchen and says, “Alexa, buy ...” and within a minute and a half she has ordered a handful of items, from dog food to chocolate. Each time the device suggests a product, the woman says “yes” and Alexa orders it. What you don’t see in the commercial is what is going on behind the scenes. When smart devices such as Amazon’s Alexa virtual assistant relieve us of the chore of shopping, who decides what products from what brands are suggested to the consumer? And who benefits?

“Voice shopping”, or voice commerce, is seen as the next big thing in the retail trade, the thing that could change everything. “Of all the disruptive technologies now in existence, voice control is one of the most disruptive,” Graeme Pitkethly, Unilever’s chief financial officer, told the Wall Street Journal in February. Unilever owns brands such as Knorr and Dove. Stephan Tromp, deputy chief executive of the German Retail Association (HDE), also believes that voice commerce will prevail: “It is just so incredibly convenient.”

The technology is shaking up the relationships between producers, retailers and the suppliers of the voice assistant – and the producers may come off worst. Amazon, Google, Microsoft and Apple have all developed voice assistants that users can talk to via smartphones or speakers in their home. As well as playing music or providing weather forecasts, they can also be used to shop on the internet. More than half of Germans have used a voice assistant, mostly with their smartphone; Google Assistant is the most used, followed by Apple’s Siri.

Amazon’s Echo is the market leader in voice shopping: speakers for homes with Alexa installed. And as Amazon’s core business has always been online trading, it has a huge lead on its competitors. But the company’s rivals are working hard to catch up: a clear statement of intent, Google has joined forces in the US with the 5,000-store chain Walmart.

In Germany, Amazon is so far the only company offering shopping, via Alexa. Germans tend to take a sceptical view of voice assistants, partly because of data-protection concerns. And online food shopping is not really gathering pace in Germany. Nevertheless, in Germany, too, sales of smart speakers doubled last year.

Gatekeepers

Voice shopping totally changes the retail experience. What things look like and how they feel takes a back seat, and instead sounds gain importance. And the sales floor vanishes: supermarkets offer metres of shelves, online shopping offers lists of search results, but with voice shopping there is only one answer – a product the voice assistant thinks is best suited to the user’s query. “With Alexa, 85% of users buy the first product suggested to them,” says Tromp. “So the suppliers become the gatekeepers with a major influence on the success of a product.”

So how does Alexa set about an order, for instance, to “Buy some sparkling wine”? First of all, the voice assistant checks previous orders, to see if the customer has ordered the same thing before. If not, Alexa suggests “Amazon’s Choice”, where every category contains only one recommendation. So how does a product get to be Amazon’s Choice? Amazon isn’t saying, only that “Amazon’s Choice recommends top-rated products, immediately deliverable and at an attractive price.” The customer can take the trouble to hear more search results or can rephrase their search inquiry – but that may be too much bother.

It is difficult for producers to understand how Amazon operates. Some express puzzlement on internet forums as to why their product was Amazon’s Choice one minute but had lost the status just a few hours later.

“With voice shopping it is vital to be the first hit,” says Christine Marks, responsible for e-commerce at Rotkäppchen-Mumm, a producer of German sparkling wine. Because there are no sponsored search results, there is no advertising on Alexa, unlike Amazon’s homepage.

Producers have been aware of what customers want since people started buying online. They evaluate customer comments and search inquiries to improve their product descriptions. “Voice-based searches function differently,” says Marks. “For example, we have to adapt to whole sentences instead of just one word.” Product descriptions have to be worded so they can be spoken aloud quickly and are easy to understand.

What is also new is that a brand can be linked to an acoustic signal. “We are also going deeper into context and making connections with particular occasions,” adds Marks. She means that when ordering and delivering is less complicated and faster, customers are more likely to order for specific events, like an all-in package for a “barbecue party” or “brunch with friends”.

For producers, that means it gets harder for their goods to end up in the customer’s shopping basket and the danger of becoming invisible is greater. But once you have done it, you have made it. Because follow-up orders make up a large proportion of voice shopping, especially with everyday products such as milk, butter or bin bags.

“I suspect it will be mainly the big, well-known brands that come out on top,” says Marks, meaning those that trigger familiar associations.

But brands may also lose importance if the visual recognition learned in advertising and supermarkets disappears. Voice-shopping traders will use that trend to push their own brands. Amazon is already doing this: in categories where the firm has its own brand, Alexa suggests it in 17% of cases. In contrast, customers shopping via the homepage only buy Amazon’s own products for 2% of items.

Others must pay

The big German supermarket chains, such as Edeka, Rewe or Metro, have long since adapted to the online trade and are creating their own logistics systems with delivery services. Their prospects of success with the new sales channel are not bad, because the voice assistants really function no differently to smartphones. External suppliers’ apps can be installed on them, too.

Google calls these programmes “actions”. Amazon calls them “skills”. There are more than 25,000 such skills in the US, and 3,000 in Germany – including from Rewe, Edeka and other firms. Up to now they have mainly been supplying recipes, but in theory they could soon emerge as shops.

“OK Google, order champagne from Rewe,” might then be the order. Or: “Alexa, order champagne from Edeka.” The supermarket would then decide which brand to offer. For the producer the basic problem remains that only one product is put forward and that could very well be the supermarket’s own brand, whether from Amazon, Rewe or Edeka. But more competition among the retailers would be good.

“If the firms with voice assistants function less as platforms and voice becomes more like an input method like a keyboard, that will surely be good for competition,” suggests Tromp, of the German Retailers Association.

The external traders might feasibly then have to pay commission to the voice-assistant operators. Apple is already charging 15% commission on all in-app subscriptions on iPhone.

Shopping via smart kitchen appliances could work on a similar principle. This is already happening with some dishwashers made by Germany’s BSH, makers of Siemens and Neff. The appliance orders dishwasher tablets all by itself when stocks run low; you only have to specify once how many are still in the packet and select a product from a supplier – in this case Amazon.

Soon refrigerators might recognise when certain goods have run out and automatically place an order to restock. “That is feasible, especially with products that meet basic needs and where emotions are not so engaged when choosing them, like milk or butter,” says Niels Kuschinsky, who is in charge of digitisation at BSH.

The company does not aim to sell products itself but to establish the connection with the retailer, with whom the customer will then sign the sales agreement. “We see ourselves as an open platform on which various suppliers can position themselves,” says Kuschinsky. He imagines it working like this: just input everything once in the BSH Home Connect app on your smartphone or directly on your fridge display, and the milk or champagne order will be all set up. At least one manufacturer will be happy.