What if one single event could disrupt e-commerce, retailing and search engines in one launch?
This article contends that there is an imminent emergence of consumer-targeted technological advancements on the horizon. It represents innovation that will challenge e-commerce, retail, and search engine industries, driven by consumer demand for greater convenience and personalized experiences, with major industry players competing to lead the change and the potential for widespread disruption hinging on strategic adaptation.
And what if I tell you that consumers will drive it? The adoption of one single new application could do just that. It could be as powerful as our adoption of smartphones. No, it's not ChatGPT or the Metaverse.
So, who and what could do this?
First, some context. When ChatGPT was unleashed on the public, I saw it as a teaser for the public to begin to get comfortable. Since then, many things have come into the open. Microsoft clarified that they wanted a piece of Google's advertising back in February of this year. Amazon has announced that Alexa is far more capable today and will improve in personalization. Apple has been receiving billions every year from Google to be the search engine of choice. Meta also wants a piece of the pie; actually, it is a few pieces that they want. Then, of course, there is this powerhouse called Alphabet Inc. They have been under a lot of pressure from the market, which punished their stock price earlier this year for not leading on the AI front with consumers. Simply, they have been sitting on many capabilities because they wanted to be a responsible company. There is nothing wrong with that as far as most of us are concerned. But when competitors are threatening your house, you need to respond a lot faster. So what happens if Google as a search engine is challenged and starts to lose share in search to many large competitors and upstarts?
Well, first, Apple will have an issue if the billions they receive from Google begin to dwindle. Then they will also need to throw their hat into the ring and go after more share of search. And when you control one of the world's largest platforms for Apps, you tend to have power. So, back in August, three of Apple's Large Language Model (LLM) AI leaders were hired by Google. The race is on, but for what? It's not just search and advertising dollars.
So what is it?
In 2007, when Apple launched their smartphone (iPhone), it was a steady, slow adoption at first, but by 2016, it was over 80% in the US. Why did it succeed? Two reasons. First, it decoupled consumers from their home and office desktops. Second, it was sophisticated and created a great deal of consumer convenience. Unless you haven't noticed, 83% of us rate convenience as one of our biggest motivators, so obviously, it saves time; it can also save you money because of its browsing capabilities to search, and lastly, the apps provided offer many options to learn, play be entertained etc. But what it can't do is be an assistant to you. Sure, Alexa, Siri and Google Assistant have tried. Still, most are clunky, and it has never seemed to be a focus to develop anything more sophisticated because it would be disruptive until now.
OpenAi has opened the door to far more sophisticated options, and the capabilities keep improving. Of course, we all know that Microsoft has a few Billion invested in OpenAi, and they will be the benefactors of whatever comes next.
Voice assistants will be represented by approximately 8.4 Billion devices in 2024. More than 50% of adults use VAs once a day and about 54% have used them to buy things. That means that over 4.5 Billion of us will ask for information about shopping. The problem with current VAs is that the process could be more seamless, and it could feel like a personalized experience. It is just a machine. People who are at home alone use VAs to have a conversation with it; think about that! This link takes you to some interesting research and data about voice assistants. By the way, the most significant users of voice assistants are millennials and GenZ, and as you know, this demographic has significant future buying power and an appetite for technology. However, not more than the 9-year-old Gen Alpha will when they turn twenty-one by 2035 and a very different consumer.
So, how do you make a VA into a Personal AI Assistant (PAIA)? What capabilities must it have? Well, it needs to know who you are and remember you by name; it should be able to speak with you as though it is a valet; it must have access to all kinds of information and help you make decisions, comparison shopping, and even place the order you want from whatever shop you want. All because in this ideal world, it will know all your preferences, from colours and sizes to brands and tastes. As a final touch, it can communicate with other AI-enabled retailers and services in seconds with access to inventories and prices. To provide you with immediate gratification. You can have your assistant order it and have it delivered, or you can drop by the store to see and try the product for yourself. Things will change if such a technology is unleashed. And retailers will have to shift very fast to keep up.
Remember, the players in this will be many, and there will be failures. Still, the ones with the financial and technological resources are Meta, Apple, Amazon, Google and Microsoft, to name a few. They will be at the cutting edge of this. Don't be surprised when the next car rolls off the assembly line, and you can converse with it on the way home; this future is now.
Where is the evidence?
About 72% of consumers are experiencing search fatigue. That says that while 93% of us use search engines to start our shopping, we are getting tired of the ads and the time it takes to find the right product, compare it and go out to buy it. It just needs to be faster. Consumers want to be part of the new leisure society, which is the working class having more free time to enjoy life.
Now, let me introduce you to a company called Inflection AI. They raised $1.3 Billion in June of this year to develop further their personal assistant, called Pi, which you can find at this link: Pi Ai. What is unique about this technology is that the AI remembers your last conversation. An essential aspect of what is needed to make PAIAs more mainstream is that the more personal it is, the better the experience. But Inflection isn't about selling. It's about helping the user on an individual and social level, which is very intriguing—a softer, gentler approach and a voice that responds to your questions. You can choose the tone and voice. ChatGPT now also comes with a voice. These are not clunky machines. Sam Altman, the CEO of OpenAi, is also in discussions with others on developing an AI device to challenge the smartphone.
Things are getting very interesting.
The PAIAs we want to see don't quite exist in complete form; however, that is what everyone is working on, and the market is expecting from developers. They don't have to create much of the technology. It already exists in a mature or advanced stage to start this. There are two things we should expect from large companies: they will buy tech startups that have new cutting-edge capabilities. And a lot of poaching of talent.
The question is, who will move first? And what will those late to the party do? Back in 2002, Yahoo tried to buy Google for $3.0 Billion. Google wanted $5.0 Billion, but Yahoo thought it was too rich. Yahoo is now a fraction of what it used to be in the market as a search engine. Something similar could also happen here if larger technology companies, even telecoms, aren't paying attention.
The next big disruptive innovation that will impact everyone from retailers to manufacturers is not years away, nor is it tomorrow.
We have also done a preliminary analysis of the types of retailers and how they may be impacted as adoption rates increase. The analysis is based on how other technology-based devices and applications have been adopted, such as streaming and social media, which both started with slow adoption and then accelerated based on the availability of technology to support them, such as higher-speed internet. The analysis is in the early stages. However, it is easy to identify what could happen if we reach 10%, 25% or 50% adoption rates; the impact moves slow adoption low risk to a significant phase on the higher end of risks. Suppose brands are not on a path to adopt more sophisticated digital and AI options. In that case, they will be in a weaker market position and negatively impacted by other retailers, such as Walmart, Canadian Tire and Amazon, who are further along with AI development.
The use of voice assistants is expected to grow at an annual growth rate of 26.5%; the opportunity to have a personal AI assistant available for consumers is all the more compelling. This can be a significant opportunity because consumer adoption of things that are easy to use, save time and can save money in addition to being convenient can accelerate broader disruption.
We can imagine a PAIA that can customize our searches and shopping, whether for a new wardrobe or stove, without hassles and fast product and price comparisons. It can be a game changer versus conducting long searches and experiencing disappointing store visits.
What are the business risks?
There are certain ethics and privacy issues to navigate. In addition, the cost for businesses to be market-ready to respond to this kind of innovation is generally still being determined, except that a business will need to have a level of AI capabilities to compete with other businesses in their sectors. The best way to think of this is another element in the omnichannel ecosystem that intends to collect more data and build a better brand.
Is this disruptive innovation and fast-paced adoption going to happen tomorrow? We will see growth and many new products offering these services. There is no question that PAIAs are going to be in our lives, and it will be up to consumers to decide if it's attractive enough to be disruptive. Netflix saved us time from visiting Blockbuster, Amazon saved us time buying books, and Uber changed the Taxi, Airbnb impacted the hotel industry. Convenience is at the core of everything in this technologically driven world because it is about the end user.
If I were to score the likelihood of this becoming the new disruptive innovation, on instincts and experience as of today, this has an 80% chance of being disruptive. Some might argue higher, but I am always cautious but very confident that it will ultimately achieve that level of adoption. Businesses need to think and react to this potential threat or opportunity, depending on which side of the fence they are on. But they must act quickly because e-commerce remains a reminder of what happened to retailers who didn't see it or believe in its potential and threat.
Conclusion
I have been sharing this with executives and in presentations over the last several weeks. This is one of the most critical consumer revolutions that we should be expecting, and that needs to be planned for. Executives agree that if this emerged, it would be a significant challenge to an already complicated marketplace.
George Minakakis is the CEO of Inception Retail Group Inc. Is a respected advisor, author and speaker who tells the story with facts. He spent 28 years between Pepsico and Luxottica in senior roles from Country Manager to CEO, with experience in Canada, the US, and China and assignments in Europe and Australia. He is a board director and chair of public, for-profit utilities and not-for-profit organizations.
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