Experts in business and investment strategy have preached about the power of brands since before most of us were born. Consumer brands such as Tide, Kleenex, Huggies, Coke, and Duracell–to name a few–have held particular sway, allowing companies like Procter & Gamble and Kimberly Clark to profit mightily from product loyalty.
A funny thing happened, though, with the advent of smart speakers like Amazon’s Alexa. It turns out that folks ordering stuff on Alexa and Google Home aren’t as loyal as consumer brand companies might like. (“Order some AAA batteries, Alexa,” not “Order some Duracell AAA batteries.”) To make matters worse for the Duracells of the world, Alexa is a really good comparison shopper. Over time, consumers will increasingly notice that if they order from Alexa by category and not by brand, Alexa will generate significant savings.
The percentage of retail spending generated by smart speakers is pretty small right now, but it’s also part of a larger trend, where online shopping makes it very easy for consumers to pay attention to price. This takes “pricing power” away from companies and has a range of investment implications. There is some thought that online shopping is playing a big role in keeping inflation (and indirectly interest rates) very low. And, of course, it could have a major effect on the share price of consumer brand companies.