Amazon's dominance of the smart speaker segment makes it well positioned to turn an increasingly work-from-home culture into a voice-shopping powerhouse.
As more Americans are working and studying at home as a precaution against the coronavirus (also known as COVID-19), Amazon’s 70% market share of the installed smart speaker base provides a chance to deepen the e-commerce giant's relationship with its customers.
“People are staying at home more, so they will have more time to discover how they can best use their speaker device. It’s no longer asking ‘what’s the weather?’ We’re moving beyond that stage," said Paul Michelotti, director and solutions architect at Avionos, a digital strategy and e-commerce solutions company.
"It’s now [the] 'creating a shopping list for home delivery so I don’t have to go to the store' phase," Michelotti said. "It’s a virtual butler named Alexa, and Amazon has the inside track — especially with Amazon Fresh and Whole Foods for delivery."
About 91 million smart speakers were in U.S. households as of December 2019, up from 66 million in December 2018 and 37 million in December 2017. However, despite the market almost tripling in size since 2017, Amazon continues to maintain a 70% share level. According to Consumer Intelligence Research, the only big change in the last two years is that Google has split its share with Apple. As of December 2019, Google had a 25% share position and Apple has achieved about a 5% share since introduction.
Amazon is rapidly expanding Alexa's reach through pacts such as its work with ExxonMobil to allow fuel purchases by voice. Amazon previously enabled Alexa payments for parking, and has offered Alexa-only deals to voice shoppers during its annual Prime Day event.
In the home, Amazon has also enabled shopping through its other products, such as digital content sold through Kindle and Fire TV, but its most shopping-focused device — the individually branded Dash buttons, which allowed consumers to re-order products on a whim — were sunsetted last year.
Amazon's decision to stop selling its physical Dash buttons leaves a void for Alexa and other voice assistants to fill. Alexa can already remind shoppers when they run low on staples such as toilet paper — a product that is increasingly sold out in stores.
Working from home
Microsoft, Twitter, NASA, Princeton University, Harvard, the Harrison County Kentucky School District and New York City’s Mayor Bill de Blasio are just a few examples of employers, schools and politicians asking Americans to stay home for fear of spreading the coronavirus.
Any digital assistant can benefit from this trend, but Amazon has positioned its Alexa better to take advantage of it, according to Richard Crone, principal of Crone Consulting LLC.
“What Google is to [typed] search, Alexa is to voice [search]. Artificial intelligence and machine learning are building a Google-like search code within Alexa through listening to how people search," Crone said. "Voice search is natural, especially in a home setting like the kitchen. Alexa is always listening. When it comes to the future of shopping Amazon will have an advantage since Alexa also has embedded payment, just wait."
In April 2019, Walmart plugged into Google to compete with Amazon Alexa’s shopping, but it didn't share Amazon's e-commerce focus. Crone noted that customers still have to drive to Walmart to pick up their purchases.
“Amazon was the first to this new market and continued to innovate as it began to understand the dynamics of consumer preferences and demand in that new market, with smaller, cheaper devices, and a range of interesting features," said Mike Levin, partner and co-founder of Consumer Intelligence Research Partners.
"It also offers some of the broadest connectivity to accessories, such as home security and lighting devices. Not coincidentally, Amazon also sells those accessories,” Levin said.
Apple’s entry to the market was very late and — in usual Apple style — came in priced at the top end of the market, similar to its approach with its iPhone and iPad devices. Levin noted that Apple has since failed to offer cheaper, simpler devices to compete with Amazon Echo Dot and Google Home mini.
The challenge for Apple and Google isn’t that Amazon has built a massive lead, it’s that once Alexa moves into mainstream shopping, it will be difficult to replace. It’s not augmentation of home speakers; rather, it’s a “rip out and replace” which most consumers are unlikely to do.
Especially if Alexa is doing the shopping.
“Consumers will have only a single operating system in a home, instead of allowing multiple ones for mobile, where consumers might, for instance, have Apple iOS on a mobile phone but Google Chrome on a laptop,” noted Levin.
