Since it’s founding in 1994, Amazon has taken the ecommerce world by storm growing to over $100B in sales by 2016. Continuously driving towards ever-greater presence in its consumers’ lives, Amazon has developed numerous services to ensure it remains top of mind. For example, Amazon Prime, at $99/year, provides its now 54 million members with unlimited free two-day shipping, streaming video service and more making it the go to online retailer.
To unlock additional revenue from its customers and remain top of mind, Amazon launched in 2014 the Echo with its AI – Alexa. The Echo combines the core components of AI and Ecommerce in an architectural innovation that delivers an all-encompassing consumer experience.
Through three key actions, Amazon has created value for its customers and captured value through an estimated 8.2M unit sales of the Echo, threatening the future viability of products from such competitors as Google, Apple, and Microsoft.
- Echo delivers over 1000 skills with ease of consumer use
Amazon’s development of Echo began in 2011 and pushed to reduce latency beyond the industry standard while ensuring the AI was conversational and the ease of use flawless. The result is a reduced latency conversing AI, which provides more than just a voice activated retail platform.
Alexa acts as the consumer’s personal assistant with over 1000 different and unique skills. Beginning with basic music and retail features, Amazon’s Echo has since added functionalities to Alexa like checking bank accounts, ordering pizza, or calling an Uber taxi by just talking to it. By connecting an Amazon Prime account to the device, Alexa assists with the playing of music and the purchasing of both previously ordered products and new ones. With Amazon Prime members spending on average $1,100 per year compared to $600 per year for non-members, the Echo provides another great connection point for consumers to easily order their favorite products and deliver increased revenue for Amazon.
- Open-System Approach
In addition to providing over 1000 skills on the Echo, Amazon has developed Alexa utilizing an open-system approach. With this open-systems approach, and financial incentives for developers, Amazon’s Echo has successfully inspired thousands of developers to develop products that either integrate with Echo or utilize the Alexa technology in their own devices.
One such successful integration is the recently designed LG smart refrigerator with Alexa embedded technology that allows the consumer to search recipes, add items to a shopping list or order products online, all through ease of voice captured by the refrigerator’s Alexa technology.
Alexa has allowed Amazon to position itself as a key software player, enabling consumers to utilize the hardware they like best while still remaining a part of the Amazon ecosystem. Alexa is now integrated with more than 7,000 services and products ranging from appliances and speakers to outlets and automobile infotainment systems making it the winning product for customer use.
- Marketing Success
In addition to Amazon’s work to ensure Echo and Alexa provide a wide range of skills in the consumer’s home through its integrative software, Amazon also invested heavily in the product’s success through solid marketing. In its first ever Super Bowl commercial, Amazon demonstrated Alexa’s benefits through celebrity appearances effectively showcasing the ability to play music, answer questions, and purchase products online through voice activation. This first catchy ad has over 19M views online and drove awareness of Echo for Amazon customers from around 50% to now over 80% leading to increased sales and further use of the Alexa’s technology.
- Future Challenge
Despite Amazon’s success in this space at an estimated 8.2M Echo units sold, with a Prime membership base of 54M subscribers, there is still significant room for Echo sales to grow. However, Amazon will need to continue to push the adoption of smart home device technology. Technological fragmentation of the smart home ecosystem; consumers needing multiple networking devices, apps and more to build and run their smart home, is currently viewed as the largest barrier to mass adoption of smart home devices. However, with Alexa, Amazon currently holds the competitive advantage and the valuable technology partnership and connections to resolve this fragmentation and provide the consumer with a seamless and enjoyable shopping, listening, and more experience at home and beyond.