Makers of biggest household staples have little control over where Amazon’s virtual assistant Alexa sends consumers
“A great but scary article on the future of retailing and Voice activated shopping.” -OAD
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Online voice assistants like Amazon’s Alexa are threatening the decades-old high-exposure marketing model for consumer goods. WSJ’s Saabira Chaudhuri explains why if brands aren’t first in voice search, they will neither be seen nor heard.
Big Consumer Brands Don’t Have an Answer for Alexa
Makers of biggest household staples have little control over where Amazon’s virtual assistant sends consumers
Sharon Terlep Feb. 27, 2018 5:30 a.m. ET
The growing popularity of voice-search assistants poses a threat to the biggest makers of household staples. Already grappling with upstart rivals, changing consumer tastes and the rise of e-commerce, personal-care and packaged-foods makers have yet to figure out how to leverage the technology.
Unlike in stores or online, where an array of brands get plenty of exposure, voice-search assistants like Amazon.com Inc.’s AMZN 1.46% 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, NSRGY 0.93% the world’s biggest packaged-foods company. Consulting firm Capgemini says voice-assistant users will spend 18% of their total expenses via voice assistants 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.
Amazon’s Alexa voice assistant has made its Echo smart speaker a hit with consumers. Photo: Luke MacGregor/Bloomberg News
“Amazon’s Choice is just our recommendation, and customers can always ask for specific brands or products if they choose,” said an Amazon spokeswoman.
Amazon doesn’t disclose the formula it uses to make product selections. A person familiar with the Alexa algorithm said it won’t always offer an Amazon product even if one is available, noting the selection depends in part on whether the item being requested is one that the shopper has purchased on Amazon before. The algorithm uses a machine-learning model to identify what matters most to customers for each product request so that recommendations improve over time, this person said.
For now, brands can’t pay Amazon to offer their products to customers in response to a generic request for a product, like detergent or paper towels.
Procter & Gamble Co. , maker of Tide detergent and Pampers diapers, would be interested in paid search were it an option, said Vedran Miletic, P&G brand director of North America fabric-care delivery.
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.
“The guy who will win is the guy who will have iconic brands and products,” said L’Oréal SA’s 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.”