Voicing concerns

Alexa, the scourge of German retailers

Amazon Alexa Hotels
The new sales assistant. Source: AP

German was the first non-English language that Amazon’s Alexa voice assistant was programmed to understand. And now scores of German retailers are wishing it hadn’t been.

The US giant has already snatched more than 40 percent of the German online retail market and the growing use of Alexa will dramatically accelerate the trend, experts warn.

The danger is all too apparent. When you tell an Alexa-enabled device to “order me batteries, coffee capsules, washing up liquid and wet wipes,” she’ll suggest four products from Amazon Basics, Solimo, Presto and Mama Bear respectively.

Those all happen to be Amazon brands, but because the customer can’t see any alternatives and presumably doesn’t really care, he or she will likely just say “go ahead.”

Sales talk

It’s simple and intuitive and there’s the illusion of interaction with another being. It’s the future of retailing: a closed system that cuts out retailers and makers of brand products.

“Voice assistants decide what product is ordered from which retailer. That means in the long term the selection and marketing done by voice assistants will be an important factor for the success or failure of products and retailers,” said Stephan Tromp, managing director of the HDE German Retailer Federation.

He said online firms should reveal the algorithms the voice assistants use for selecting products. But other experts say the only way to beat them is to join them.

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“Voice assistants could become an existential threat for retailers. If you’re not present in that field, you won’t be in the market much longer,” said Achim Himmelreich, an e-commerce expert at consultancy Capgemini.

Politely yet relentlessly, voice assistants are wedging themselves between the consumer and the retailer. A Capgemini survey found that 64 percent of Germans have used a voice assistant via their phone or a smart speaker like Amazon’s Echo or Google Home. Another study, by consultancy OC&C, found that 85 percent of customers purchased the product Alexa suggested.

Around a billion people are expected to use voice assistants in some form this year. Amazon has dominated the market but rivals are catching up. Alexa had a market share of 80 percent of new sales worldwide at the beginning of last year but in the first quarter of 2018, only 44 percent of smart speakers sold came from Amazon. Google Home had a 26 percent share. That’s good a bad news for retailers: On the one hand Google isn’t a direct competitor and can pass business on to them, but on the other it will most likely charge a hefty commission.

Talking shop

“The question for me is how much of my hard-earned money I want to or have to pay a third party for inserting themselves between me and the customer,” Jan Kunath, the deputy CEO of supermarket chain Rewe, told Handelsblatt.

Retailers will have to respond by developing apps for smart speakers. Some are already venturing into this new world. Fashion retailer Zalando has launched a gift-finding chatbot which asks questions about the prospective recipient and then makes recommendations. And electronics retailer Media-Saturn is one of the first European partners of Google’s retail platform “Transactions on Google.” Rewe, meanwhile, has purchased Commercetools, a startup that specializes in new digital sales channels.

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Mr. Himmelreich, the e-commerce consultant, said small retailers lack the funds to invest in voice commerce, which means the sector will likely see further consolidation.

But even big players aren’t assured of survival if they don’t act promptly, experts said. Voice commerce has the power to fell giants and enable small players to achieve rapid growth.

Florian Kolf leads a team of correspondents covering the trading and consumer sector for Handelsblatt. Joachim Hofer covers the sports, leisure and IT sectors for Handelsblatt. To contact the authors: kolf@handelsblatt.com, hofer@handelsblatt.com

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