Amazon has updated its lineup of Alexa-powered Echo smart speakers, but also added some unexpected products like a pair of smart glasses with Alexa voice assistant built in, a smart ring that can be used to trigger Alexa and even a microwave oven.
Many wonder why Amazon is interested in selling products like Echo smart speakers, Fire TV sticks and a pair of smart glasses powered by Alexa. It’s a valid question to ask – after all, Amazon is an e-commerce company.
But Amazon’s hardware ambitions are big and the company has just started scratching the surface of what it wants to do. For Jeff Bezos, co-founder and CEO of Amazon, any venture he dwells in is part of a long-term goal. That’s the foundation of Amazon Inc, a company which is known for making big bets on new markets early on.
‘The hardware journey’
Amazon successfully built its reputation as a strong contender in consumer electronics with its revolutionary Kindle ebook readers. It released the first Kindle in 2007, the same year Apple launched the iPhone. While it wasn’t the first e-reader to hit the market, it did popularise the e-book format. The Kindle’s hardware was, of course, the biggest talking point. But what really popularised the Kindle was the self publishing format called Kindle Direct Publishing.
Kindle’s popularity was a big win for Amazon’s hardware ambitions. The company tried to offer a hardware product that successfully merged with the content, the core philosophy of Amazon. The seamless integration with the Kindle Store, which is essentially a service, made the Kindle the undisputed king in e-readers. Despite the fading popularity of e-readers, Amazon still offers Kindle in a variety of models in the market.
After the stupendous success of Kindle, Amazon launched the Fire tablet. The company could have made a tablet that rivals Apple’s iPad, but the company chose to sell the Fire way cheaper than the Apple iPad or Samsung Galaxy tablets. The intent was not to sell the best-specced tablet, rather it wanted users hooked to a wide range of services it offers, such as video, music, Kindle Store and Amazon.com. Tablet sales might have dropped significantly over the past few months, but for Amazon, the Fire tablet which doesn’t even run on Android, is still an integral part of the company’s strategy for selling its goods and services to consumers. The Fire tablet starts at $50 and goes up to $200 for the top-end model.
If the Kindle e-reader and Fire tablets cemented Amazon’s expertise in hardware and services, the failure of Fire Phone dampened all the excitement. Amazon’s first smartphone was a massive failure and the company’s ambitious take at smartphones was soon forgotten.
‘Alexa and Echo changed everything’
But then came Alexa, a voice assistant that helped Amazon enter a new market of smart speakers and eventually the smart home segment. Amazon may have missed the opportunity to make it big in smartphones, but the company managed to jump into the industry’s shift to AI ahead of its competitors. And that helped Amazon emerge as a rising star in an AI-driven voice assistant with Alexa. The voice-controlled “personal assistant” Alexa can play music, deliver news, tell you the weather, control your smart home and even allow Prime members to order products from Amazon. The company says Alexa has over 100,000 voice apps, or skills.
The Echo proved to be a game changer for Amazon. Who would have thought smart speakers would become a category in itself? Today, Amazon offers the Echo in various models targeting different customers. With nine different Echo-branded smart speakers, Amazon is undoubtedly the leader in the smart speaker segment. The company rules this segment with more than 25 per cent market share globally, according to market research firm Canalys.
“The Echo devices serve as touch points where Amazon can enhance the relationship between its platform and the users,” says Canalys Senior Analyst Jason Low. “It is also serving as a distribution channel for content and new form of services (assistant skills, on demand services, etc.). While smartphones have been crucial in driving users to becoming increasingly mobile, there are plenty of opportunities to explore in the home scenarios too,” he said.
While initially Alexa was built into the Echo smart speaker, the Alexa ecosystem now includes TVs, headphones, smart bulbs, smart glasses, vacuum cleaners, laptops, tablets, microwave ovens, coffee machines, smartwatches, etc. Alexa is available on both Amazon first-party products and third-party devices from other manufacturers. There are as many as 85,000 Alexa compatible devices and that number is growing fast.
‘Alexa is key to Amazon’s hardware ambitions’
Alexa, which has interactions with customers billions of times a week, is key to Amazon’s growing hardware dominance. The company wants Alexa to be everywhere, but it can only be made possible if it offers the right hardware that demonstrates the best use case of Alexa.
The company needs the hardware to keep consumers hooked to Alexa’s new features and skill sets. And that’s exactly what Amazon’s Senior VP of Devices and Services David Limp has been trying to achieve.
A device like a microwave oven pushes Alexa more deeply into Amazon’s ecosystem. Users can speak commands like, “Alexa, Alexa, defrost these vegetables,” and the microwave will do it with a simple voice command. If you have installed Ring’s doorbell in your home, Alexa will be able to answer your doorbell for you.
If there is a major takeaway from Amazon’s Wednesday event, it has to be how Amazon envisions Alexa to be a central part of the device experience.
‘Services will drive value for money hardware’
Amazon is essentially a services company. This isn’t surprising – the company sells everything from Diet Coke to books on its e-commerce platform. It has a video streaming service, a music streaming app, a subscription service that gives members access to a variety of Amazon benefits, a live streaming platform for gamers…the list is endless.
It makes sense, therefore, to release its own hardware products that are optimised to run its services. You will never see Amazon making a $1000 tablet or $399 smartwatch. That’s not Amazon’s business model. The company makes money by selling its services to consumers and the hardware is the gateway to sell Amazon products such as Prime Video platform and Alexa voice assistant.
The difference between Amazon and Apple is their target audience. Amazon makes more affordable and mass market devices, compared to Apple which targets the premium segment. Both companies have different go to strategies and business models.
“Amazon’s business model revolves around selling directly to customers and improving the customer experience. It is important for Amazon to find demand gaps where it can address by introducing new services, business models or devices, therefore enhancing the customer experience,” Low explained.
“So far the Amazon Prime subscription service has been successful in terms of increasing user stickiness. By providing value-added perks and services, such as content streaming, Amazon is able to ensure that customers are tied in within the Amazon ecosystem of services. The more value that users get from Amazon, the more challenging to substitute Amazon with other services, and the more challenging for competitors to replace Amazon,” he adds.
‘Experimenting with the hardware’
Amazon’s fall event was also a precursor at the company’s lineup of products that aren’t mass market yet. The Echo Frames, for instance, are prescription glasses with built-in microphones for Alexa commands. No, they don’t offer a display or AR capability – just limited to voice commands through the speakers. At the moment, they are available for users to try out through invite-only system. The Echo Loop, on the other hand, is a smart ring that puts Alexa into your fingertips. The smart ring, like the Glasses, will be made available by invitation only.
Both these devices show that Amazon has new ideas to put Alexa on the wearer’s ears and body. But it will be some time before we know whether Amazon’s ambitious gadgets have any takers. However, one thing is clear: Amazon efforts here certainly don’t lack for ambition. The Echo and Kindle were born with the same idea. Should a device like the Echo Frames take off, Amazon has another hit device under its sleeve.
Disclaimer: The author is in Seattle on the invite on Amazon India
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