Spielwarenmesse: Speech recognition: potential impact on toy retail

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Speech recognition: potential impact on toy retail

from Steve Reece

Our generation has seen far more technological advancement than any before in human history. Technologies which were the stuff of science fiction movies only 40 or 50 years ago are now everyday commonplace! Among all these technologies though, one area which is likely to cause huge disruptive change has been comparatively under reported within toy circles. That area is speech recognition.

Speech recognition technology has improved

From the earliest incarnations speech recognition technology has shown huge promise conceptually for sure, but at the same time the experience was typically very frustrating in the past, with the user having to repeat themselves several times even to get the most basic of words recognised. In fact, there are several banks who insist on having you shout at the phone with simple words like yes or no several times just to make progress and check your account balance or make a simple query!

The good news in terms of user experience is that technology has advanced considerably in the last five years or so, largely due to investment from global tech behemoths like Amazon & Google. We’re now in a situation where speech activated assistants like Amazon’s Alexa, heard through their Echo & Dot smart speakers, are consistently delivering to consumer expectations without the same frustration factor. This means we are heading into a new explosive growth era for this technology.

Speech technology will disrupt retail

The implications of these advancements are huge, in fact, they are bigger than huge! Voice commerce sales already accounts for $1.8bn sales in the USA and ca. $200m in the UK. This includes retail sales triggered by voice ordering via various software, services and hardware. These figures in themselves are already impressive, especially for the USA, but the projections are even more impressive: In March 2018 the OC&C Strategy Consultants published a survey for 2022.

By then the USA is forecast to hit $40bn retail sales via voice commerce, with the UK tipped to top $5bn by the same date.

This is a huge tsunami wave about to hit consumer products industries, and there doesn’t seem to be sufficient anticipation of this massive wave which is in the midst of arriving. So, let’s take a look at some of the implications of this change for the toy industry, especially toy retailers:

  1. Toy retailers need to embrace this change – many retailers took too long (as much as 5-10 years in some cases) to get serious about e-commerce. In this case Amazon and others have taken the lunch of other retailers who buried their heads. Practically speaking the voice commerce revolution is going to further grow market share for Amazon above all, as they have the market leading and dominant software and hardware. So, if you thought Amazon in e-commerce form was a threat, there will be a significant part of the consumer products market which will be primarily purchased via them due to the captive audience inherent in their devices capturing the market.

  2. Human beings are primarily creatures of habit – creating a particular shopping habit in the first instance is the challenge, when it is 2nd nature, human beings will tend to automatically repeat the same purchase path. This habit is currently being formed in ever increasing scale, so if any retailers out there are going to respond aggressively now is the time before hundreds of millions of habits form!

  3. To avoid panic mongering, we must be clear though that in many cases voice will not be as effective or as popular as a visual search when it comes to entertainment products like toys, and as such voice commerce may not be as big a threat to toy retailers as e-commerce has been. Voice commerce will lend itself most to repeat purchase of functional low value items where price comparisons are less important and the same item is needed continuously e.g. paper, printer cartridges. There is though some potential for toy consumables and toy related consumables like batteries, compound refills e.g. Play-Doh tubs.

  4. Highly aspirational hot selling toys could also be a likely purchase from Amazon, where the parent is motivated to buy the toy without need for price comparison, because these can be described by voice and purchased with express delivery.

  5. Clearly lower cost or less head count heavy customer service is going to result eventually, although we’re not quite there yet.

  6. As ever, those physical ‘bricks and mortar’ retailers who are not able to capitalise directly on voice commerce will usually benefit from their fundamental competitive advantages versus ‘virtual’ retail: Product knowledge combined with customer service and in store experience.

One good example of experience in toy retail is Hamleys of London in England. If you haven’t been to Hamleys, let me briefly describe what happens when you visit. Firstly, when you arrive at the store you are met with real ‘WOW’ in terms of the amazing window displays. Then a greeter in uniform welcomes you, and their colleague is there to bring on the fun with some kind of (perhaps intrusive!) play like spraying bubbles, throwing toy planes etc. As you move through the store, demonstration is a key factor, in fact over the years Hamleys demonstrations have been the launch pad for various successful toy brands and companies.

The point is this – at some point in time over the last generation as we have been hit with wave after wave of technological innovations we have not always maximised the effect of the advantages physical retail can have. Retail is a hard business, so the importance of finding a counter advantage is critical.

Speech recognition in toys

The other major area where speech recognition is affecting the toy industry is in the product itself. We’ve had voice recognition toys for quite a long time, but again the software or hardware has often not been good enough to deliver true magic experiences. Children are not likely to continually repeat themselves to a toy with poor speech recognition capabilities.

Today though we are increasingly heading to the point where the toys can get so slick that we can expect children to have a degree of meaningful interaction with toys. Clearly this comes with great responsibility for toy companies, but also heralds fantastic opportunities for high end tech driven toys better than ever before. What exhilarating times we continue to live in!

The opinions expressed in this article are those of the author and do not necessarily reflect the views of Spielwarenmesse eG.

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