Amazon needs Alexa, Echo to secure its future in payments

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Voice commerce, which is the act of audibly purchasing items from a virtual assistant, hasn’t been around very long, but Amazon knows how important the technology is to their future long-term goals.

That’s why when Amazon announced for a second year in a row that they would be offering Alexa-based speaker owners a chance to get early Prime Day deals, it made perfect sense based on Amazon’s eye towards the future.

That eye, which over the last few years has been focused on the acquisition and retention of Prime members, still rests solely on that aim, but with a twist. That twist lies in the elite purchasing power that comes from Prime members that are also Echo owners.
That combination is the cream of the crop for Amazon. Especially when Prime members are already known to spend five times more than non-Prime members.

What do the numbers look like? According to a recent study, Amazon Echo owners share two interesting traits, which are: They spend about 10% more than they did before they had the device; and they shop 6% more frequently than they did before.

When you look at the potent combination of Prime customers (who are the only ones eligible to shop on Prime Day) and Echo owners, Amazon was shrewd to give those customers extra special treatment.

But, in addition to the increased purchasing that comes with voice shopping, some analysts are saying that Amazon could parlay the technology into a revenue stream that could bring in several billion dollars per year in the near future.

According to a recent report, Amazon could gain revenue from:

The income that comes with selling the speaker itself: With an assumed two-year replacement cycle, and an average selling price of $85, this combination could generate $5 billion in yearly revenue by 2020.

Platform-related income: Amazon over time will continue to invent and implement “skills” for Alexa, which will be integral for apps and companies to be successful on the platform. If Amazon can charge brands to appear more prominently in their app store, or on lists for recommended restaurants or service providers, than they could gain a sizable amount of revenue from businesses.

Increased use of Amazon Web Services: With a fully-owned speaker network, developers will need to use AWS to create commands, apps or perform analysis. With that kind of control, anyone who wants to get in on their massive network will have to pay-to-play.

For Amazon, though, the market is heating up with Google and Apple investing massive resources into becoming the dominant player. While Google and Apple both have similarly loyal fan bases, Amazon has the edge in momentum. That momentum, which has stemmed from the massive demand during its Prime Day sales, is what will push Amazon into the lead.

So, as long as people keep buying its speakers, Amazon will keep giving those people more deals and more incentives to use it.

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