Editor's note: An earlier version of this article cited an incorrect figure for the number of Alexa users that have made a purchase with the device. The article has been updated.
So-called conversational commerce was going to change the way we bought things. And ordering products by talking into a smart speaker was not only going to alter how we shopped, but also revise the way business did business.
During a recent developer conference, Alphabet's Google made a big show of its artificial intelligence (AI) Google Assistant making a hair salon appointment. Amazon.com (NASDAQ:AMZN) partnered with home builder Lennar to convert some model homes into showcases for its Alexa voice assistant, to show homebuyers the technology's potential by turning the lights on and off, controlling the TV, and ordering products.
Some analysts even "conservatively" peg the market opportunity for conversational commerce at $35 billion by 2020. Others forecast it could go as high as $40 billion.
Yeah, that's not going to happen, at least not with Echos, Google Homes, or even Apple Homepods.
Not the revolution that was imagined
Smart-speaker sales are expected to hit 100 million units this year, and reach 225 million units by the end of 2020. Amazon's Alexa-enabled devices own two-thirds of the smart-speaker market, while Google has about a 30% share. Yet despite these devices' proliferation, people aren't really using them to buy stuff, nor does it seem they really want to.
The tech news website The Information reports that out of some 50 million Alexa users, only 1 million have bought something with the device. Amazon disputed those figures, saying that "millions of customers use Alexa to shop." But it seems that people are more interested in using their devices for listening to music and other entertainment, controlling other connected devices like the lights or the TV, and checking the weather.
Still, Amazon has tried to make it as convenient as possible for shoppers to make purchases by suggesting products if they ask Alexa to do a search. For example, ask Alexa to buy toothpaste, and it will recommend the Crest brand.
Amazon reportedly held talks with companies like Procter & Gamble and Clorox on allowing them to pay for higher placement in search results as a means of targeting consumers based on their shopping habits. It had also toyed with the idea of allowing overt advertising on the platform, but ultimately killed it.
The risk for such companies is that Amazon has expanded its line of private-label products across numerous categories, and it could choose to suggest its own items ahead of the name brands.
Ahead of its time
It's not surprising that conversational commerce isn't taking off. Being fed a predetermined list of product suggestions is a limiting feature, not a benefit. And not being able to actually see the product you're buying makes shopping an inferior experience to surfing Amazon's website or perusing Google's shopping site.
Talking to a speaker is just not a very practical way to shop, particularly when there are tens of millions of products to choose from on the major e-commerce websites, versus the small sampling of goods you'll be presented with through a speaker.
It could be that conversational commerce is where e-commerce was 15 years ago, when people only made tentative attempts to buy stuff through their computer; unsure of how to proceed, not trusting the new technology, and worried their financial data would be compromised. E-commerce is now commonplace and accounts for 9.5% of all U.S. retail sales.
Where there is likely a place for conversational commerce is the larger mobile commerce milieu. If you know exactly what you want to order, like your morning coffee, it's a perfect fit, which is why Starbucks is betting on an AI-based mobile ordering system through its app.
A recent survey by Voicebot.ai and Voysis found that over one-fifth of U.S. adults shopped via voice, but that 56% used a smartphone to do so. Only 0.58% prefer to use a smart speaker, and even among those under 44 years old who are much more likely to use voice shopping, only 1.3% used a speaker.
Of course, smartphones are much more prevalent than smart speakers, and we've long used our mobile devices to buy things, so we're going to be more comfortable doing so. Maybe smart speakers just need more time.
Even so, despite Amazon enabling Alexa users to shop at Whole Foods Market using Prime Now based upon their order history, it seems we're still a long way off from doing much of our shopping by simply talking to a speaker.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, and Starbucks. The Motley Fool has a disclosure policy.