Omnipresent Amazon: Shopping Unlimited

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Omnipresent Amazon: Shopping Unlimited

Amazon’s consumer platforms Alexa, Dash Replenishment Service, and Fire TV are all destined to become part of the devices the commerce behemoth sells. The company is deploying the same strategy with all three and is using other tactics to get companies young and old aboard. The goal: being available everywhere for Shopping Unlimited.

by Marcel Weiss

Imagine you have just founded an exciting new consumer-focused startup in the sprawling IoT space. You have a fancy new hipstery coffee machine in the works that, thanks to its “smarts,” can be remotely triggered to start making coffee via its smartphone app, can automatically make different kinds of coffee and so on and so forth. Maybe you go to the popular crowdfunding platform Kickstarter to get your pre sales in and, in general terms, see what the demand for your first product of your new company looks like before you go into production for the first time.

After you have successfully fulfilled your crowdfunding campaign, the crucial part starts. You have a product that works but you don’t really have a brand yet. You have some early adopting fans, but you don’t have a large customer base. You have a product, but you don’t have a market yet. The route to market is hard for new hardware startups in the consumer space. What now? Where do you turn to?

Immediate access – Shopping Unlimited

This is where Amazon’s Launchpad comes in. Amazon gave this section in the US the subhead “New Products from Today’s Brightest Startups.” You get the gist. With Launchpad, Amazon gives startups a place to present and sell their products. Launchpad promises distribution to companies that have none yet. From the start, Amazon positioned Launchpad as an international product. With Launchpad, startups immediately got access to ten of the markets Amazon operates in. Bringing startups aboard early on is attractive to Amazon. It binds young, potentially successful companies to Amazon. Distribution can be like a drug, and Launchpad is a gateway drug.

Echo and Alexa provide an active user base for companies that want to jump on board fast.

Amazon made Echo broadly available in the US in June 2015. Germany and the UK followed in 2016. And just recently, this June, Echo launched in France. Amazon meanwhile also released different versions of Echo and they certainly will bring even more form factors to market. The real story though is not about Amazon’s own devices, but the software/ cloud platform behind them: Alexa. To understand Amazon’s long-term goal for electronics and the future of retail, Alexa is a central piece of the puzzle. Amazon sells inexpensive devices that merely connect to the cloud where everything comes together on the platform level.

All the Echos Amazon is selling are dumb terminals for the cloud. They are cheap entry points to the world of Amazon. So why are they inexpensive?

Shopping Unlimited: Amazon Echo Family

Amazon: Echo is a cheap entry point, but the real story is not about Amazon’s own devices, but the cloudbased software platform behind them.

To maximize the user base for the platform beneath. They are, to borrow a phrase first coined by industry analyst Ben Thompson, the best customer of the Alexa voice platform. But they are not the only one. Amazon’s Echo devices are the first avalanche. They provide an active user base for companies which want to jump on board fast. The more interesting step, thus, was when Amazon opened up Alexa to be integrated into every device possible.

One visible consequence: since 2017, Alexa has been the secret star at CES two years in a row. Without Amazon itself even being present at the yearly trade show. Smart home companies like Invoxia or Vivint, smart lightbulb manufacturers like Philips, GE, and many, many others, speaker companies like Sonos or Lenovo, and so on, were expectable candidates for integrating Alexa into their products.

But Alexa also found its way into cars via the Garmin Speak and directly integrated into new Ford and BMW cars. Thanks to cooperations with Microsoft and manufacturers, Alexa is also finding its way onto laptops. The first Android devices with Alexa preinstalled have also long since hit the market. This list is not exhaustive. This is just to prove a point. By now, it should be obvious that Amazon’s goal is to have the Alexa platform as broadly available as possible. Alexa is being built to be an operating system for everything voice. Wherever voice may go, Amazon will be there as one of the big platform vendors.

On March 31, 2015, Amazon unveiled the Dash Button. Many at the time thought of this as a premature April fool’s joke. But the people at Amazon are anything but fools, and by now the number of available FMCG brands for Dash Buttons are into the hundreds.

Coffee machines revisited

Besides the Dash Wand, an Alexapowered barcode scanner, the Dash family also counts the Dash Replenishment Service (DRS) amongst it. DRS is an integrated refillment service; an automated Dash button, if you will. Remember our hipstery smart coffee machine? With DRS, the coffee machine knows when the coffee will be used up and automatically reorders fresh beans. Amazon can count Siemens, Bosch, and Samsung amongst some of the manufacturers integrating DRS into their home appliances. As with Alexa, DRS implements an Amazon functionality right into the devices.

Customers to be able to use Alexa wherever they are.

In April 2014, Amazon launched the first iteration of Fire TV. Fire TV is a small box that via HDMI connects your average TV to the Internet. Like Roku or Apple TV, Fire TV nowadays represents the smarts in “Smart TV”. Amazon sells three different form factors of these TV devices, but again, the more interesting aspect from a strategy perspective is the integration part. Toshiba and Element are the first to sell a “Fire TV Edition” of their products on Amazon. They won’t be the last.

Amazon everywhere

Do you see the pattern? As with the Echo and Alexa and with the Dash Button and DRS, Amazon sells Fire TV devices and integrated “Fire TV Editions.” Stand-alone devices and integrated functionalities, all connecting to a cloud platform controlled by Amazon. Amazon wants to inject itself into as many devices as possible. And the online retailer now has at least three consumer-facing platforms it is pushing for integration into devices. In this light, initiatives like the Amazon Alexa Fund, which invests in companies building devices with Alexa, have to be seen as ecosystem amplifiers. It doesn’t end with “conventional” connected devices either. With Amazon Key, Amazon is building a platform for smart door locks that every startup in that space can hook into in the near future. And why shouldn’t they: convenient home delivery of online orders is a good use case for smart locks making those locks desirable.

Shopping Unlimited: BMW and Alexa in the Car

In the driver’s seat: Alexa has found its way into cars via Garmin Speak and is now being directly integrated into the latest Ford and BMW models.

With Amazon being the biggest online retailer in western markets, this leads to a question: how much can Amazon leverage the distribution strength it has accrued? With Launchpad, Amazon is trying to bring startups early onto its commerce platform. With DRS or even a wild combination of Fire TV and advertising-based Prime channels – which are planned – device manufacturers may get a cut from the revenues generated through their devices. To fledgling consumer facing IoT startups, Amazon presents distribution, possible investment, differentiation, and a possible recurring revenue stream. This is quite a unique proposition.

Amazon may well be on the way to becoming the major player for B2C IoT. There is some consolation for those wanting to compete with Amazon. The latest announcements regarding DRS implementations date back to 2016. Not everything Amazon tries out immediately becomes a juggernaut; just remember the Fire Phone, which tanked almost immediately back in 2015.

In its recent earnings report, Amazon said that it wants “customers to be able to use Alexa wherever they are.” Some believe they may try their hand again at a phone, as Benjamin Schachter, technology analyst at Macquarie, wrote in a recent note to investors. Maybe. But it is more likely that Amazon will coerce starving Android manufacturers into pre-installing Alexa. Amazon can use its ecommerce power to promote those products that have Alexa, DRS, or Fire TV integrated over those products in the same categories that do not. An integrated Amazon service may for certain product categories become an implicit prerequisite for getting promoted to Prime customers, as well.

Shopping Unlimited: Amazon Devices

Making a dash for it: Amazon’s Dash Replenishment Service (DRS) service is currently being integrated by Siemens, Bosch, and Samsung into their home appliances.

It is obvious that at some point in the future this will become a regulatory issue. Abuse of market power seems inevitable at this point. Until then, Amazon will almost surely find its way into more and more connected devices and the boundaries between retail and products will blur further and further.

This is inevitable with connected devices: connectivity also allows for embedded e-commerce. For the first time, the seller of a product is given the power and the incentive to become a service provider for the product. You don’t just earn by selling the devices, but also through their usage. Amazon is simply the first and most aggressive company yet to start taking advantage of this.

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