C&B Notes

Voice Dictates Choice

We have been internally discussing the impact of voice search for some time, including its implications for retail, consumer products, and Google’s search business.  With voice potentially growing to half of all searches, the stakes of the voice search race dominated by Google and Amazon are enormous.

Unlike in stores or online, where an array of brands get plenty of exposure, voice-search assistants like Amazon.com Inc.’s Alexa often steer shoppers to a single product, usually selected by an algorithm with no input from the sellers.  That isn’t a big problem now, as voice searches account for a sliver of purchases.  But it could be.  In the next five years, half of searches on the web will be done via voice, estimates Sebastien Szczepaniak, a former Amazon executive who now heads e-commerce for Nestlé SA, the world’s biggest packaged-foods company.  Consulting firm Capgemini says voice-assistant users will log 18% of their total expenses via the devices in the next three years, up from 3% currently.  “Of all the disruptions that are taking place in all the things technology is bringing into our space, voice is among the most disruptive,” said Graeme Pitkethly, chief financial officer of Unilever PLC.  “In digital investment this is our biggest focus.”

For decades, the makers of packaged-food, personal and home-care brands have bought shelf space at retailers like Walmart Inc. and Costco Wholesale Corp. that guarantee them nationwide exposure.  They have poured billions into branding to make their products instantly recognizable.  Selling on websites offers some of those same advantages: Brands can pay for placement on a webpage and display their packaging and logos.  Voice shopping, which currently offers customers just one or two product options, could chip away at that tried-and-tested model.  “When it comes to voice search you go first position or you go home because beyond the first or second place there is no future,” Mr. Szczepaniak said.

In a test conducted in October, Bain & Co. found that for customers making a first-time purchase without specifying a brand, over half of the time Alexa’s first recommendation was a product from the “Amazon’s Choice” algorithm, which implies a well-rated, well-priced item that ships with Prime.  Bain also found that in categories in which Amazon has a private brand, 17% of the time Alexa recommends the private-label product even though such products make up just 2% of volume sold.

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Alexa dominates 70% of the U.S. smart-speaker market, according to Bain.  There are other options to voice shop including Google Assistant, which for instance lets people buy things on Walmart.com using the Google Home speaker.  It offers shoppers brands based on previous purchases made in store and on Walmart’s website.  Some executives predict voice search could help the biggest brands by encouraging shoppers to gravitate to products that are top of mind or by entrenching existing preferences.  Once customers purchase a specific brand, Alexa usually picks the same brand for subsequent responses.  “The guy who will win is the guy who will have iconic brands and products,” said L’Oréal SA Chief Digital Officer Lubomira Rochet, who is working to figure out how to get L’Oréal’s products chosen by Amazon’s algorithm.  “I believe voice is as big as the internet — and Google — when it came.”