June 14, 2018 | NEWS
Surge in ‘silent commerce’ sets up opportunities
‘Silent commerce’ is on the rise. Automated transactions are increasingly woven into the fabric of people’s lives, offering the promise of smooth, seamless efficiency and the freedom to focus on more important things. The question is, how far can this trend go?
Changing consumer expectations
Millennials with disposable incomes are embracing the effortlessness of ‘silent commerce’: they expect stuff to come to them. For some time they have been used to paying for a subscription to Spotify to instantly access thousands of songs. They consider it routine to have monthly beauty boxes from Birchbox or healthy snacks from Graze delivered to their door. From coffee to chocolate, vegan treats to audiobooks, subscription services are becoming more ‘mainstream’ to meet the demand for convenience.
‘Silent commerce’ has long been used by the over 40s to pay for practicalities, whether it’s settling bills via direct debits or having a pay TV subscription. Now, their attitudes too are being reshaped by millennials’ shopping habits. Time-saving solutions, including weekly meal packs, organic produce boxes and diet food plans, are proving popular.
Intelligent wish fulfillment
Subscription is a clear model, of course, where consumers have to opt in. What comes next is the notion of ‘intelligent push’. The ‘Internet of Things’ combined with access to data around what individual consumers are doing and buying sets in place the conditions for the next phase of ‘silent commerce’. Retailers and brands have the potential to anticipate consumers’ needs and – with their permission – pre-emptively send them products, knowing that they need them.
Advanced technologies, combined with CRM tools, are making that leap possible. Mobile technologies and ‘Smart Speakers’ from Amazon, Google and others are building the connective tissue between retailers, brands and consumers. It’s not a stretch to imagine Amazon learning that you like a takeaway with your Friday night viewing and sending one round to your home, with a minimal level of confirmation of the order.
Implications for retailers and suppliers
Retailers are in a strong position to exploit ‘silent commerce’ as they can see exactly what is going into consumers’ shopping baskets. The next step is to pre-empt needs and provide solutions. Household non-food consumables, such as cleaning products, could be scheduled for delivery on a regular cycle from a supermarket. The transactions keep running silently in the background and consumers are softly locked in. The switch from bought-in-store to delivered may incur slight costs on the retailers’ side (for delivery, for example) but can help to reinforce customer loyalty and share of wallet and for many could be a marginally costed extra drop on a scheduled delivery.
For brand owners it may be more complicated to discover people’s buying preferences, but the prize is bigger. ‘Silent commerce’ presents an opportunity to disintermediate retailers and gain far greater margins. We see these trends in play today.
Direct-to-consumer (D2C) brands including the well-established Dollar Shave Club in the US and Harry's are already cutting into the men’s shaving market by offering subscription plans. Other D2C businesses selling regularly to consumers now cover sectors as diverse as fashion, oral hygiene and pet food. Brands interested in pursuing the ‘silent commerce’ model, however, must have a relevant single product, or a portfolio of products, that makes sense for a consumer to buy on subscription.
The way forward
So far, ‘silent commerce’ has represented a way for new brands and new retailers to break into established consumer markets and traditional consumer-retailer relationships. As the scale of the opportunity becomes clearer and acceptance of the model grows, established players need to reassess their interest in the concept and the approach they wish to adopt.
‘Silent commerce’ can be a major disruptor to the conventional brand-retailer-consumer value chain. There will be winners and losers as the landscape evolves further. Participants need to plot their path forwards.
Find out more about Alex Birch, Partner