Insights
Nov 20, 20188 min read

What the voice revolution means for e-commerce.

by Klarna.com

AI-powered voice assistants could be the biggest digital game changers since the iPhone was released a decade ago. Experts believe they will transform the way we buy things online. But it’s still very early days, and some key questions are yet to be answered.

Let’s take a closer look at those questions in this article.

How will voice assistants transform e-commerce?

“Alexa, add tomatoes to my shopping list.”

Is this how you buy your groceries? Even if you’re not doing it yet, it may only be a matter of time. Almost one in five Americans now own a smart speaker, according to research from Nielsen, and 40 percent of those households own more than one device. This indicates that buyers are adapting to the new behavior of talking to their virtual assistant, and want it to be available throughout their homes. On average, users spend 65 minutes interacting with their smart speakers on weekdays, and 72 minutes on weekends.

Amazon, which invented the market for smart speakers with the Echo in 2015, has a 70 percent market share in the US, according to a recent report by research group CIRP. Google Home, which is rapidly growing in popularity, has 24 percent while Apple’s HomePod takes the remaining 6 percent.

It’s interesting to look at what people use their speakers for:

Not surprisingly, music is at the top of the list. Other common tasks are asking for real-time traffic information and chatting with the voice assistant for fun. Shopping is not among the most common areas of use, according to the Nielsen survey.

This might have a lot to do with the novelty of the technology. However, looking at the applications which are most commonly synced with smart speakers, shopping apps come in at second place (52 percent of users) just behind audio streaming apps. And the future looks promising. By 2022, smart speakers will generate more than $40 billion in home shopping sales in the United States and the United Kingdom alone, according to a report from OC&C Strategy Consultants. Globally the number will be much higher, as Alexa and Google Assistant are adapted and released to more markets. Not to mention Chinese giants like Alibaba and Tencent who are also rolling out their own voice assistants and smart speakers.

Many merchants are already experimenting with how to leverage the trend. In September, British retailer Argos was the first in the country to launch a voice-activated shopping service that lets you ask Google Assistant to reserve products for in-store pick-up. Once you’ve found the right product, Argos send a notification to your phone to complete the order.

But in the current market, how much are people actually buying using only their voice?

In short: not that much. Although expectations are high, the big revolution isn’t here yet. Earlier this year, a report from The Information based on leaked Amazon data showed that only about two percent of people with Alexa devices have actually used them to make a voice purchase so far in 2018. That means around 100,000 out of 50 million or so Alexa users.

But these numbers don’t tell the entire story. Because according to the same report, a million people have actually tried to buy stuff using Alexa, but only 100,000 completed their purchase. What does that tell us? Maybe that the demand is already there, but the technology so far isn’t.

Another important thing to keep in mind is that smart speakers are used for putting stuff on the shopping list (as mentioned in the beginning) which then translates into sales through other devices. They’re also used for tasks like ordering food and calling the plumber, which rely heavily on voice search results.

As time goes on, more people will own smart speakers and the voice assistants will get smarter. To buy something online only using your voice might feel weird now, but it could be completely normal in the not-so-distant future.

Which sectors will be affected the most?

As you’ve probably understood by now, daily grocery shopping and household services are two sectors that will be among the first to feel the full impact of the voice revolution. But as AI technology improves, voice-controlled devices will throw off their reputation as funny gadgets and become indispensable parts of our lives. Imagine your assistant taking care of all your bills and payments, making sure you don’t run out of milk, and handling all your family members’ appointments and activities. Not to mention, giving you personalized recommendations on everything from shopping discounts to your next favorite TV series.

Voice-controlled devices are set to transform our lives just as smartphone have done. Instead of manually searching for information or stuff to buy, we’ll just ask our assistant for advice. It’s hard to imagine a field of business that won’t need to adapt.

What can merchants do to prepare themselves?

The number of smart speakers is growing rapidly around the world. Internet guru Mary Meeker identified voice-controlled products as one of the main trends for 2018. So if you’re not already adapting your e-commerce business to voice-based buyer behavior, you’d better get started. Sales volumes might be small at the moment, but it’s the perfect time to experiment with the new possibilities that are emerging.

A great place to start is by looking at what market leaders Amazon and Google are offering. Amazon pioneered the smart speaker market with Echo and has retained a firm lead on the number of devices sold. Naturally, the company is striving to drive more business to their own platform. But they are inviting third parties to build “Skills” (similar to apps) that users can install on their Alexa-enabled devices. Google is also offering the possibility to build apps for their voice assistant. A good approach is to start exploring what can be done to promote your business in a relevant way. Establishing a position now in the voice-driven landscape may very well pay dividends in the future.

How about privacy?

Do you want your devices listening to everything you say at home or in your car? If your answer is no, you’re not alone. Amazon recently announced that Alexa will be able to hear you whispering to it and reply in the same tone of voice. Of course, manufacturers assure us that their smart speakers only listen when we address them. But what if they’re lying, or what if their assistant gets hacked? Multiple privacy scandals in recent years have seriously harmed peoples’ trust in companies handling their personal information in a secure way.

A survey done by Accenture in the UK showed that 48 percent of people using voice assistants believe the technology is always listening – even when it hasn’t been given a command. More than a quarter of respondents said they wouldn’t use their device to make payments, and 28 percent were hesitant to use it to pay bills. These trust issues must be properly addressed before voice assistants can be a major shopping tool. Here, regulated banks and payment solutions such as Klarna will play a vital role.

The marriage of voice and vision

Another big e-commerce trend is visual search (both images and videos), which you can read more about here. All the internet giants are now building smart displays that can both talk to us and show us things. Facebook recently revealed Portal, an audio and video device with a high-definition screen, built-in camera and four microphones, which includes Amazon’s Alexa and will eventually incorporate Google Assistant. Google has also released a similar device called Home Portal and Amazon has their smart display Echo Show. It’s not far-fetched to think that this type of product will soon have a central role in many homes around the globe. So if you as a merchant want to place your bets for the future, this is a good place to start.