Amazon is working to tighten its stranglehold over the fixtures in your home and the way you shop.
And it’s doing that using $50 stocking stuffers.
Over the past week, the world’s largest online retailer said it would start selling two of its gadgets fitted with its virtual assistant, Alexa, for that low price. It even offers both devices — the 7-inch Fire tablet and the Echo Dot — in six packs (no, really). The price of the new Dot, which was first unveiled in March, was slashed from $90.
But why offer Amazon-branded electronics for so little money? Those cheaply priced devices are really lures to hook you into Amazon’s network of services and products. Just as its Prime members tend to spend about twice as much with Amazon as non-Prime shoppers, folks who own Amazon devices also spend more with the company and are more likely to join Prime.
For example, owners of Amazon’s Kindle e-readers tend to buy their e-books through the device. Watchers of Amazon Prime Video tend to purchase videos through that service.
“Amazon could pay you to use the Kindle and Fire and they’d still be doing great,” said Michael R. Levin, co-founder of market research firm Consumer Intelligence Research Partners.
Amazon is now using its traditional ploy of offering cheap hardware to grow its user base to try cornering the new smart-home market. As dozens of companies rush to add Wi-Fi and Bluetooth connections to more appliances and devices around the home, Amazon is hoping to position its Alexa voice assistant as the hub that controls all those items.
That position could become very lucrative, and not just because Alexa would be a critical part of every up-to-date household. Amazon could also ensure that Alexa-powered smart homes would double as tiny Amazon stores, just as its Kindle and Fire devices already do.
“They’re choosing a pretty low price point to get as many people using Alexa as possible and turn Alexa to as broadly used a platform as possible,” said Yory Wurmser, an eMarketer retail analyst.
Take that, Google
Amazon also appears to be seeding the market with Alexa devices as a pre-emptive maneuver against Google, which is coming out with its rival Google Home smart speaker later this year. Amazon announced the new, lower-priced Dot on Wednesday, along with a move to bring its Echo smart speaker, a $180 device that also houses Alexa, to the UK and Germany. (No official price has been revealed on the Google device.)
The danger for Amazon is that the smart home is still being invented, so it’s unclear which levers of control will end up being the most important, said Josh Lowitz, also of CIRP. That means that even though Apple and Google haven’t been as aggressive in expanding their smart-home partnerships as Amazon, their strength in phones could end up outdoing Amazon in the long run.
Smart speakers should continue to be a much smaller market than phones, as well. While smartphone shipments worldwide hit 343 million devices in the latest quarter, smart speaker shipments should reach just 1.3 million units for all of this year, IHS Markit said. Smart speaker shipments should hit nearly 9 million units by 2020, the researcher added.
Amazon has already sold an estimated 3 million Echo speakers in the US since introducing the product in late 2014, CIRP said earlier this year.
But even with those smaller numbers, Amazon is laying the groundwork for becoming the default smart-home hub and, potentially, creating more regular Amazon shoppers in the process.
“It’s a very long game to change people’s habits,” Levin said, “but they’re doing it.”