Time to Talk Pov FINAL

AUTO-ID LABS Time to talk The future for brands is conversational Consumers are adopting smart speakers an order of magnitude faster than they did the smartphone. The devices, and the voice assistants which inhabit them, will change shopping forever, creating a new era: Conversational Commerce. This document explains how it will accelerate the changes e-commerce is already creating in consumer industries; how it results in a new, emotionally engaged relationship between consumers and brands; what it means for customer experience; how artificial intelligence makes it possible; how business operations will need to adapt; and the huge opportunities Conversational Commerce presents to organizations that get it right. 2 Time to talk 3 Executive Summary Preface: clues to the future lie in the past Shopping is finding a new voice. consumers and brands. Retailers and Consumers are set to use more than manufacturers will become providers 190 million in-home conversational of curated services and customer devices, like Amazon Echo and Google experiences that solve problems and In 1948, only 2% of households in Commerce built on For consumers, it will be an intuitive Home, by 2019.1 Growth in the market engage consumers, whether at home, Britain owned a fridge.2 With no way relationships and engaging experience. It will create for smart speakers is set to hit over in the store, or on the move. to chill milk, meat, or other perishable demand for fulfillment in whatever 600% annually during its first five foods, the vast majority of housewives To see the potential impact of smart manner shoppers desire, offering them years, more than twice the rate of As such, Conversational Commerce walked to nearby shops nearly every speakers and voice assistants on a new sense of value. For retailers and smartphone adoption. The retail becomes a means by which the industry day, where they would be greeted shopping, let’s once again go back in consumer goods manufacturers, it market addressable through these serves consumers as household by name by shopkeepers they knew time. Buying food in the 1940s meant presents the opportunity—and the devices will reach $35 billion by 2020, servants or local shopkeepers once did: well. The introduction of affordable shopkeepers knew the shopper. They challenge—of developing deep, sticky but voice platform owners, including they will sense the mood, anticipate and effective home refrigeration could sense her mood as she walked brand affinity with an ever-growing the world’s leading online retailers, will needs, and provide inspiration. It will transformed the relationship between into the store. They knew the local cohort of shoppers. The winners will be the gatekeepers to this new source be personal and emotional, but also shopper and retailer. Together economy, heard gossip, and learned be useful, trusted, entertaining, and of growth. They will be free to promote performed at scale. It will do so through with car ownership, it made bulk family news. This intimacy helped appropriate in their engagement with any vested interests in retailing and an exchange in value: consumers buying possible, and a mass-market shopkeepers anticipate which products their target market of consumers. brand promotion, a situation the sharing their data; organizations emerged in which consumers were would be best for which consumer, industry should avoid. offering access to enterprise more familiar with brands than with and guide them accordingly, trying to resources. Organizations foreseeing the people running stores. As stores make shopping a fun social experience The mass adoption of smart speakers this fundamental transformation can and store chains grew larger, they winning long-term loyalty. and voice assistants should ring alarm expect to increase consumer loyalty, were able to command more of the bells for consumer industries, but it will grow brand value, and explore new consumers’ attention through strategic At the high end of the economic also present opportunities for those avenues of growth. merchandising, tactical discounting, spectrum, the upper classes employed The next big battlefield that understand the nature of this new and loyalty-card schemes. Although butlers and maids to shop for them, but for the hearts and mode of shopping. “Voice-ordering is timings differ, we have seen similar the servant’s remit went well beyond not just another channel.” It marks the trends throughout the world. buying groceries. They would know and minds of shoppers.” era of Conversational Commerce— foresee the family’s needs and wants, creating a new relationship between Technology is once more about to and plan shopping and services around upturn the way brands, retailers, and them by, for example, preparing for a consumers interact. E-commerce reunion dinner or sending flowers to an started the transformation—and this aunt on her birthday. is just the beginning. Amazon and Google are among the global hi-tech Conversational Commerce promises companies launching smart speakers to fundamentally alter relationships and voice assistants that can listen between consumers, retailers, and as well as talk to people, helping to manufacturers—it is the next big organize consumers’ lives. They can battlefield for the hearts and minds answer queries, offer advice, play of shoppers. It is the local shopkeeper, music, control the household heating, loyal servant, and personal assistant and, most importantly for consumer all rolled into one. A new generation industries, take shopping orders. of artificial intelligence (AI) will allow brands to talk to and listen to consumers on a personal, one-to-one basis, but at scale. 1 MIT Auto-ID Lab Predictions, United States market, data sources Morgan Stanley, 2 Household news: Can you guess how long the fridge has been around? https://www.goodhousekeeping.co.uk/institute/product-reviews/latest-news/ RBC Capital and eMarketer household-news-happy-birthday-to-the-fridge 4 Time to talk 5 A growing tempest in a larger storm Deep industry knowledge of Conversational Commerce will enter There are many other examples of a market already in flux. In the past digital entanglement, and what they products, markets, and consumers five years, e-commerce has grown share is an effort to create habit- by 70% while in-store sales have only forming value that ties the consumer as differentiator increased by 6%.3 But, it’s not only to the provider. Providers then gather direct e-commerce sales that matter. more data, which they can analyze and According to Forrester, over the next use to tailor services, product offers, Recent history offers some stark lessons five years, Western European online or advertising, further drawing in retail sales will grow at over three consumers. for those ignoring the strategic ramifications of times the rate of total retail sales. digital technology in consumer industries. Merely Increased consumer connectivity across Binding shoppers to multiple digital devices, particularly broad services building a transactional website or a mobile app smartphones, is driving online sales did not address the complexity and far-reaching growth.4 Although not all interactions will be about shopping, the voice platform’s effects of e-commerce. Shopper behavior changed As e-commerce continues to take ubiquity and power to manage home the lion’s share of consumer industry and family life will bind consumers to it, faster than the industry. Leaders prospered growth, digital native firms, born of playing into the entanglement strategy enormously. Laggards spent years catching up in the technology or online sectors, are of digital native firms. The impact busily executing strategies of digital on the current dominant consumer lost sales. entanglement. Examples include: and retail brands will be huge. Voice platform owners can collect, process, • Apple’s move into music and respond to customer data and are In Conversational Commerce, the leading distribution—a big leap from free to promote and discount their building computers, but one technology and e-commerce firms have the products or those of favored partners. designed to tie consumers to its iTunes service and product upgrades So long as the experience is good, advantage in devices (think not only smart speaker consumers will be loyal to the platform, • Google moved from dominating web but also smart phones) and back-end intelligence, searches to providing smartphones not necessarily brands—an outcome with operating systems, email, both retailers and consumer goods but retailers and manufacturers have a deep and online software. It is now manufacturers should be anxious to making significant investments in avoid. knowledge of their products, their markets, and personal support services such as their consumers. With the right technical alliances, Google Assistant and visual-scanning technology Google Lens they can exploit Conversational Commerce to build • Amazon offers Prime membership, which not only gives consumers a new relationship with consumers, growing the preferential e-commerce business in the meantime. services, but also television and media content. 3 Monthly Retail Survey and administrative records 4 “Online Retail Will Drive Overall European Retail Sales Growth Through 2022,” Forrester Research Inc., December 5, 2017. 6 Time to talk 7 In the US, the market for smart Are you ready? speakers is growing at a rate of 653% annually in its first five years, compared with a 20% for the tablet and 286% for the smartphone (Figure 1).8 Figure 1 “I was born

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