Eight significant implications of the coming revolution…
Bots and AI are disrupting virtually every industry vertical. One of the most impacted will be ecommerce. As bots do the shopping for humans, many old assumptions will crumble, leaving massive disruption in its wake.
The current ecommerce industry is built around the assumption of the inefficient human shopper. Humans have limited memory and computing capacity. Humans are creatures of habit, favoring the familiar and valuing convenience. Therefore, ecommerce businesses that are well-known, that capture and retain credit cards, that take fewer clicks to transact, or that offer automated recurring subscriptions tend to win—even if they may not offer the best price or value. Or rather, the perception of value for humans is different.
However, the next generation of shopping bots, or intelligent agents, will be completely different. They have effectively unlimited memory and computing capacity, are not swayed by branding, and can do repetitive, seemingly inconvenient tasks. These intelligent bots will be hyper-rational shoppers optimizing value for their human owners. They will level the playing field between merchants and shoppers by arming consumers with similar tech firepower to save money and increase value. Here are eight specific consequences of the coming bot revolution:
- Bots will make branding irrelevant. Brands are artifacts of the limitations of the human mind. The human mind can barely remember a handful of brands at purchase time; therefore, brands spend heavily to buy mindshare. Once shopping decisions are influenced by or delegated to bots, this equation changes. Shopping bots can visit hundreds of merchant bots to find the best product or price. Instead of spending money on human mindshare, brands will be better off investing in improving product or price. Bots will discover even the smallest or newest ecommerce merchant, if they offer better value.
- Bots will render dynamic pricing algorithms irrelevant. Many merchants dynamically raise and lower prices based on anticipated human behavior. However, bots can monitor prices continuously and, in fact, take advantage of dynamic pricing to get a better deal. For example, Waylo and Sentinel are shopping bots that monitor prices continuously so you can buy when the price drops.
- Bots make subscriptions irrelevant. Many business models are built around offering subscription services for recurring-use products (e.g. diapers, razors or groceries). They offer consumers the convenience of not having to remember periodically. However, our bots will manage subscriptions themselves. Bots don’t forget. Bots can “keep the refrigerator stocked” while purchasing items from different merchants. That means merchants will have to continue providing better value in every transaction to keep the shopping bot coming back.
- Bots eliminate the benefit to the merchant of building a large customer credit card database. Today, consumers are expected to share their credit card with every merchant they want to transact with. This causes security concerns, which is why consumers tend to share their cards with just a few merchants they trust. Therefore, merchants with a large number of credit cards have an advantage in growing wallet share. However, shopping bots will be able to transact with merchant bots without sharing credit cards. Bots may help the user transact anonymously by spawning a transient bot for each transaction. More secure transactions increase the customer’s ability to buy from more merchants than before. This will diminish the value of the lock-in created by accumulating credit cards.
- Bots eliminate the need for aggregators and intermediaries. Many ecommerce models are built around aggregation and intermediation (e.g. flight aggregators or hotel aggregators). Shopping bots can do the aggregation by themselves without relying on a third-party aggregator. Shopping bots will clearly get better value by cutting out the intermediary. Just as travel agents disappeared when online booking emerged, the current aggregators will disappear when bots are doing the shopping. Bots like Boltfare can find ridiculously cheap deals by aggregating and monitoring hundreds of sites.
- Bots will diminish the value of customer loyalty. Once loyal customers form a habit, it leads to repeat purchases and higher margins for the merchant. Once bots start assisting shoppers, bots will insist on better value from the merchant in exchange for committing loyalty—inverting the economic value of loyalty. Merchants will no longer be able to automatically assume loyal customers making a repeat purchase out of habit; they will have to continuously deliver value in every transaction.
- Bots will upend popular shopping traditions. Promotions such as Black Friday or Spring Sales attract customers into the store; once they’re in the store, they tend to stay longer and buy more stuff. What if every purchase decision gets made independently, based on value? What if the promotion on one item does not translate into additional purchases? Bots work 24-7 and will not need to wait for the long weekend to shop. We’ve already seen “Black Friday” being converted to “Cyber Monday” with the rise of human-driven ecommerce; this will further morph into “Bot Everyday” with the rise of bot-driven ecommerce.
- Bots eliminate many supposed “barriers to entry.” Ecommerce companies built many barriers to entry by engineering their service to arbitrage human psychology. The mantra was to offer convenience, selection and price. Now, the very nature of the shopper is about to change: the new customer is a super-shopper, an economically rational actor with practically infinite information, memory and computational capabilities. They will not care about convenience or selection—they can take care of it themselves. The only way to appease them will be to deliver better quality or price.
Of course, there will still be economies of scale on the manufacturing and fulfillment side to charge a premium. However, many of the current models built around human shopping habits will be disrupted, creating opportunities and threats for all current players. While the first wave of commerce disruption was driven by tech-powered merchants, this next wave of disruption will be driven by tech-powered shoppers, with perhaps even more significant implications. iBi
Beerud Sheth is the cofounder and CEO of Gupshup, one of the world’s most advanced bot and messaging platforms. For more information, visit gupshup.io.