Just hearing this statistic alone is amazing as only years ago, smart speaker systems were more of a novelty item.
For background, the Amazon Echo itself was released in November 2014 (alongside Alexa) and has since capitalized on a growing hunger for a market looking for new technology.
For those that don’t know, Amazon Echo is a smart home speaker system, with Amazon’s own virtual assistant called Alexa inbuilt within it.
In January 2018, Consumer Intelligence Research Partner (CIRP) estimated that Amazon’s Echo dominated around 69% of the US smart speaker market. Compared to other competitors like Google, Amazon has managed to capture the majority share of the market.
In the last quarter in 2019, Amazon shipped over 10.4 million units at 36.6% of the WorldWide market whilst Google’s sales fell by almost 40%.
Alexa devices maintain 70% market share in U.S. according to survey — Source
Looking at these statistics, it’s no doubt that Amazon has performed tremendously well to capitalize big within the smart speaker industry.
So how did they manage to nail such amazing numbers since 2014?
With the recent Black Friday deals, you were able to put three Amazon Echo Dots in your home for only $65.
These are incredible prices, considering a typical Bluetooth speaker could cost the same for just one.
But how is it so cheap?
There are two reasons within this bucket.
One is cheap labor costs from having productions set up in countries like China.
By having their production facilities within these countries, Amazon is capitalizing on producing bulk devices at much cheaper rates.
In leaked documents, however, it was found in some cases in China, school children have been used to produce these devices.
According to these documents, these teenagers were from around the central-southern city of Hengyang. By classifying them under “interns”, their teachers were paid by the factory to help supervise them.
Unfortunately, this can be the reality of outsourcing labor into countries like China where production facilities over there will find loopholes to exploit cheap labor.
The second major reason is the goal to have a global ecosystem footprint.
Amazon’s goal isn’t to create a large slab of cash from the Echo.
Even though their numbers are impressive, what’s even more compelling is its ability to upsell its products and services.
By creating an ecosystem that households become more dependent on, Amazon will most likely aim to reap the rewards down the line.
A great example would be utilizing Amazon to re-buy items or groceries with a simple command. This is already occurring and similar types of situations will be occurring more often down the line. More on this point will be discussed further down.
Having Correct Positioning
Amazon‘s early bet on Alexa paid off, being the first major tech company to breach the market.
With its launch in 2014, Amazon didn’t try to oversell the Echo device either.
Google did come in 2016 and decided to undercut the Echo’s price and remained its fierce competitor until recent years when the Echo slashed its price even more.
With the let down of other voice assistants like Siri, it was clear that there was room for improvement.
Amazon came into the market early as a speaker (rather than a fully automated voice smart speaker system) with a few smart voice commands.
This slowly evolved as Alexa improved over time and with positive word of mouth, helped grow the smart home device to its market leader position.
In only a few years, it became a novelty speaker into an ecosystem of smart IoT products.
Amazon’s Core Infrastructure
Amazon has well…Amazon.
As mentioned earlier, creating a seamless experience when purchasing through the Amazon Echo will allow Amazon to reinforce its position as the number 1 e-commerce store in the world. Based on research, consumers with an Echo device spend even more than the average Prime member so they’re doing something right.
With their acquisition of companies like Ring. it further adds to products that compliment the Echo.
What makes it amazing is Amazon will continue to add more products and services to its portfolio that will naturally support the infrastructure around the Amazon Echo products and specifically around Alexa.
At its annual hardware event in Seattle in September this year (2019), the company announced a new range of products from smart glasses, earbuds, an alarm clock and a “smart ring” called the Echo Loop. These products all support Alexa and aim to widen Amazon’s product range within this space.
It’s not only products though.
Amazon also showed off new Alexa capabilities, such as a multilingual mode which helps enable more from users who may not speak English as a first language. Other features include new ways to add the voice assistant to smart security devices, further expanding on Alexa as a feature-heavy voice AI product.
Through some clever positioning, competitive pricing model and just having the core infrastructure, Amazon has dominated the smart speaker systems market.
With the recent explosion of competitors however from China with the likes of Xiaomei and Baidu, it will be interesting to see what happens in 2020 within this market.
Baidu is especially an interesting one to keep an eye on as similar to Amazon, it has a similar infrastructure, that being it is one of the biggest e-commerce stores within China (and the world).