Amazon Echo is a Trojan horse that threatens traditional retailers

16 Feb 20181.42k Views

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Amazon Echo Dot (2nd Generation). Image: Zapp2Photo/Shutterstock

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As e-commerce goes mainstream, more product searches take place on Amazon every day than on Google or Facebook. And Alexa is listening.

The online economy is growing and growing but more evidence shows that Amazon’s intricate engine, which now includes voice AI interfaces such as Echo, is threatening traditional retailers.

The most recent study by digital marketing agency Wolfgang Digital has found that e-commerce transactions are up 32pc on last year and traffic is up 14pc.

‘Amazon is now actively listening to you in your home so it can sell you more things next time you log on to Amazon on a screen. What’s more, consumers are paying for the privilege of welcoming this 21st-century Trojan horse into their home’
– ALAN COLEMAN

It estimates that Ireland’s online economy is worth €12.3bn, or 6pc of GDP in 2017.

And, not only are people browsing and buying more frequently, they are parting with more cash. The average retail shopper in Ireland will spend €147 in a single transaction online.

Key findings include the fact that desktop remains the number-one buying device at 58pc, but is slowly losing ground to smartphones, which accounted for 30pc of e-commerce revenues, up from 26pc in 2016.

The smartphone dominates when it comes to traffic, accounting for 51pc of visits to e-commerce websites versus 38pc for desktop and 11pc for tablet computers.

Travel is booming, with transactions up 65pc and traffic up 114pc on the previous year.

Overall, retailers with an online presence saw online revenues climb 19pc. The Black Friday sales day copied from the US saw sales grow 56pc in 2017, with 7pc of retailers’ Q4 revenues generated on that day alone.

Asked if the smartphone is the new cash register, Wolfgang Digital CEO Alan Coleman replied: “Not yet. People still prefer transacting on desktop, with our report showing that 58pc of revenue still takes place from desktop and laptop devices. Looking forward, a question many retailers face is whether to invest in an m-commerce website or an app.

“An m-commerce website is better for winning new customers as a website is significantly more discoverable than an app. However, a well-designed app can make the buying process easier for existing customers and encourage repeat orders.”

While Irish retailers are famously and lamentably slow to embrace e-commerce – less than a third of Irish sites are set up to handle transactions – the major trend to watch is the growing power of Amazon.

Alexa knows what’s coming

Amazon Echo is a Trojan horse that threatens traditional retailers

Alan Coleman, CEO and co-founder, Wolfgang Digital. Image: Wolfgang Digital

Amazon recently launched its Echo voice platform in Ireland, and numerous tech players are licensing Amazon’s Alexa AI and Google’s Home technology to deliver everything from next-generation fridges to other internet of things (IoT) platforms with a voice interface. Not to be outdone, Apple will also soon launch its HomePod platform powered by Siri in the European market.

Do these devices represent a kind of Trojan horse that will drive another nail in the coffin of traditional retail?

Asked if he believes Ireland is about to receive a major onslaught from Amazon, Coleman responded: “Not in the way people are predicting. The ‘voice search will kill screen search’ prediction is baseless. There are three core truths to successful e-commerce: make it visual, increase selection, and make it quick and easy for people to digest the information.

“Voice search is none of these – it removes all visuals, it presents a single search result and it takes up to four times longer to hear words than to read them. Ain’t nobody buying shorts, skirts or sunglasses off Alexa!

“Rather than remove buying friction, Alexa actually creates it. The new paradigm of retail that Amazon is investing in is not one where you can speak to an Amazon device in your home to make it easier to buy things. The new paradigm is that Amazon is now actively listening to you in your home so it can sell you more things next time you log on to Amazon on a screen. What’s more, consumers are paying for the privilege of welcoming this 21st-century Trojan horse into their home.”

“So, the move from Amazon that could become a digital tsunami is its advertising offering. More product searches take place on Amazon every day than on Google. Amazon has taken the best features of Google and Facebook advertising and is building them into its own ad platform to allow advertisers connect with these product searches.

“Right now, most of the best ad formats are only available to brands and vendors selling on Amazon. The majority of Irish retailers are not selling on Amazon, so they are at a significant strategic disadvantage.”

For its part Amazon has disputed Coleman’s assertion about Alexa listening. A spokesperson explained that Alexa does not listen until the device detects the wake word. And nor does Amazon use a customer’s audio information for targeted advertising or customer recommendations.

“We take privacy very seriously at Amazon, and Echo and Alexa are no different,” the spokesperson said.

“Amazon Echo devices use on-device keyword spotting to detect the wake word and only the wake word. When the wake word is detected, the light ring at the top of the device turns blue to indicate that the device is streaming audio to the cloud. We do not use customer’s audio information for advertising or customer recommendations.”

The silver lining? Research online, purchase offline

But, while all of this is happening, do ordinary users prefer m-commerce over the traditional retail experience?

Coleman believes consumers don’t see them as different.

“Researching on a phone while on foot and then dropping into a shop to make a purchase is all one shopping experience for them. Facebook and Google are both rolling out ‘research online, purchase offline’ (ROPO) reporting at the minute, where you can track when transactions occur in your physical business location and other offline channels after people see or engage with your ad.

“When deeper ROPO reporting becomes the norm for multichannel businesses in 2018, marketers will stop seeing their website as ‘just another store’ and start to see it as part of all their stores.

“Armed with ROPO reporting, multichannel retailers will finally have the data to create a better customer experience in which offline and online working together for a better shopping experience,” Coleman predicted.

Updated, 5.50pm, 16 February 2018: This article was updated to include the views of an Amazon spokesperson who pointed out that Amazon Echo’s Alexa does not listen until the device detects the wake word.

Amazon Echo Dot (2nd Generation). Image: Zapp2Photo/Shutterstock

Editor John Kennedy is an award-winning technology journalist.

editorial@siliconrepublic.com