Retail

The Frightful Five: Amazon Slays, Apple Prays

December was a good month for Amazon. Really, 2017 was a good year for the eCommerce giant, and we’ve got the numbers to prove it. Apple took more of a roller coaster ride – months later, analysts still aren’t sure how the iPhone X will perform, and whatever happened to that HomePod? Plus: Facebook to sink more funds into video, Google tries to dig in its heels in the smart speaker race, and Microsoft scrambles to patch a vulnerability (but the fix has its own drawbacks). All the details in this week’s edition of the Frightful Five – just in case you missed it!

Amazon

The 2017 holiday season was its biggest ever, according to eCommerce giant Amazon. So what exactly does that look like? Well, for starters, it looks like a whole lot of Instant Pot multi-cookers, WowWee Fingerlings toys, Fitbit Charge 2 fitness trackers, 23andMe DNA tests, and robot vacuums.

However, to get a better look at the vast scale on which Amazon succeeded this past month, this is one of those rare situations in which the numbers can tell the story better than words.

More than 4 million people became Prime members or started a free trial the week of Christmas and shopping on the Amazon app was up 70 percent year over year.

Amazon says it sold tens of millions of Alexa-powered, voice-activated devices, selling out of the Echo Dot first and all other versions of the Echo soon after. The Fire TV Stick sold twice as well as last year. Alexa climbed to the top spot in the Apple App Store over the holiday weekend and hasn’t budged since. That’s got to sting for Apple, which of course has its own virtual assistant Siri embedded in every device.

Amazon Prime reportedly shipped more than 5 billion items worldwide across the entirety of 2017 – and 2 billion of those were sold by small- to medium-sized businesses using Fulfillment by Amazon, which allows SMBs to sell goods on the platform and outsource logistics to Amazon.

To support all those sales, the company grew its fulfillment and shipping network by more than 30 percent in square footage worldwide. It leveraged more than 6,000 trailers and 32 Amazon Airplanes to serve Prime members throughout 2017.

In the U.S., Amazon grabbed 44 percent of eCommerce sales and 4 percent of all retail sales in the country. This was largely driven by consumer electronics, luxury beauty, grocery, and furniture.

According to RBC Capital Markets’ annual Alexa survey, Alexa awareness is up to 89 percent from 77 percent last year, and 15 percent of respondents said they owned an Alexa-enabled smart speaker, up 2 percent from last year. Analysts are predicting that, by 2020, Alexa could be adding more than $10 billion to annual sales by enabling customers to shop by voice.

Apple

Are iPhone X sales great or terrible? It depends who you ask. Recent weeks have been a roller coaster of “They love it. They love it not.”

First, Consumer Intelligence Research Partners learned that the new iPhones (8, 8 Plus, and X) were only accounting for a combined 69 percent of iPhone sales in their first month. Comparatively, the 7 and 7 Plus models together accounted for 73 percent of iPhone sales in their first month, while the 6 and 6 Plus made up 91 percent of sales in their first month.

Then, Apple said it would slash its sales forecast for the iPhone X to 30 million units in the fourth quarter, down from 50 million originally planned. That led to drops in Apple shares as well as in shares of Asian suppliers. However, CEO Tim Cook has said he “couldn’t be happier” with demand, and some analysts say that May and June could see significant make-up shipments.

Despite all that, iPhones and iPads made up 44 percent of devices activated during the holidays between Dec. 19 and Dec. 25. This would appear to be good news, yet the models carrying the company are older models that some markets view to be more affordable. The new X model is reportedly taking a back seat to the continued popularity of the iPhone 6 and 7.

Many analysts did not think that any “pent-up demand” for the newer model would inspire greater sales in January. “Consumers who wanted to get an iPhone X in December 2017 already have it,” said Nicolas Baratte of CLSA in a note to CNBC. Others, however, are holding out hope for shipments between 40 million and 45 million units in the first quarter of 2018.

Facebook

2018: the year Facebook will spend a billion dollars on video? If CEO Mark Zuckerberg gets his way, it could be. Facebook Live and Facebook Watch have failed to take off in the way the social media giant may have hoped (although to be fair, more than 10 million users went live on New Year’s Eve). Throwing more money at the problem should solve it, right?

Maybe if users saw the current iteration of video on Facebook as a problem. However, it does little good to improve a feature if that feature is not the reason users are visiting the site. As strongly as Zuckerberg believes video to be a “megatrend,” consumers have made it clear that they are not turning to Facebook to satiate whatever video needs they may (or may not) have.

Google

Although 2017 saw the debut of several new smartwatches, it was smart speakers that made the most Christmas lists. eMarketer Forecasting Analyst Cindy Liu said that many consumers can’t justify the cost of a smartwatch, since these wearable devices can often cost as much as a smartphone. The lower price point of speakers, said Liu, would make them a more attractive gift for tech enthusiasts.

It would seem that both Amazon and Google recognized this, since both giants slashed the prices on their smallest home speakers, the Amazon Echo Dot and Google Home Mini, to as low as $29 (down from $50) for the holidays.

Furthermore, Google has teamed up with LG Electronics to build the Google Assistant into one of LG’s new speakers, to debut at the Consumer Electronics Show (CES) later in January. This will be LG’s first premium AI-powered smart speaker.

Microsoft

Along with Amazon and Google, Microsoft is pushing out a fix for a processor security flaw. The patch is available for Windows 10 users now and will roll out to Windows 7 and 8 users soon. Some PCs with older processors could see a slowdown in processing speeds after running the fix, but that’s a small price to pay for keeping hackers and fraudsters from accessing otherwise protected and secure data.

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