Sizzle/Fizzle

Sizzle Fizzle: Electric Cars Sizzle, Toys”R”Us Fizzles And The Speaker Wars Wage On

Sizzle of The Week: The Speaker Wars

As the clock runs down toward Christmas, there are two less than totally serious “wars” one could choose to focus on.

The first takes place a long time ago, in a galaxy far, far away.

The second takes place right now – in a retail ecosystem that, like the force, surrounds us all.

Granted, the first one, the one that takes place in the stars, gets a little more mainstream attention because of the laser swords, Jedi, space battles and shocking reveals; it is a slightly more exciting story.

But the second one, currently being fought out between the various smart speakers on the market, is likely to be the more impactful. Because, as Yoda might say, once a consumer starts down one voice-activated AI path, it forever dominates their retail destiny.

Which is why so many are lining up to be the mechanized voice that consumers talk to – and likely why Amazon is keeping that competition so incredibly fierce by setting off a price war to celebrate the holiday season.

As of Black Friday, Amazon had cut the price on all six of its Echo devices, with the entry-level Dot selling for $30.

And that big drop paid dividends: The Dot was Amazon’s top-selling item during the holiday shopping weekend, and is currently backordered on the site.

And where Amazon goes, its rivals have been forced to follow for fear of losing more than they already have to Amazon’s Alexa market share. Google Home’s Smart Speaker is now on sale for $79, and the Home Mini is undercutting the Dot by a buck at $29.

Apple took a slightly different tack and basically conceded holiday 2017 to Amazon. Its $349 HomePod will debut sometime in 2018 at more than double the price of Amazon’s top item, the Echo Show, which is currently on sale for $150.

“Amazon is all about driving [speaker prices] to the bottom, because for them it’s an entry point for eCommerce,” said Holger Mueller, an analyst at Constellation Research.

Pricing the speakers at $30 makes consumers more likely to throw an Echo Dot in the basket, even if it wasn’t on their shopping list, he noted, and Amazon has shown an historical willingness to loss lead, particularly if they can create a new consumer habit.

And that willingness has been particularly acutely observable in the smart home speaker ecosystem, where it has actively pushed a race to the bottom by bring its prices down 50 percent over the course of the last 12 months. On average, it takes consumer electronics about a decade to see that much decline in average price. Smartphone prices have fallen 32 percent in 10 years, and market leaders Apple and Samsung Electronics show no signs of reducing their prices anytime soon.

But smart speakers are still largely an untested commodity for consumers, who are still a long way from adopting them with the level of ubiquity as smartphones. Nonetheless, because they are also clearly a massive commerce enablement opportunity in the making – which remains largely untapped – Apple, Google and Amazon are all eager to gain a firm foothold in that market.

Exactly one of those brands is succeeding hard enough to sizzle: Amazon.

With control of roughly 75 percent of the smart speaker market, and over a year’s head start on their competition, Amazon is the smart speaker’s market resident analog to the Empire. Amazon’s voice assistant has the largest number of skills (and we are aiming to help it build more with our Alexa Challenge), the largest number of integrations, the most concrete step into other areas of smart tech (like cars, for example) and is far and away the best known. It also has, as its eCommerce support system, the Death Star-like Amazon Marketplace, which has spent the last half decade blowing up traditional retail like it’s Alderaan.

The Google Home entry is increasingly looking like the retail rebel alliance, comprising Walmart, Target, Home Depot, Costco, Walgreens, Bed Bath and Beyond – essentially every retailer that would prefer to stand against the Amazon marketplace. It’s also been giving its speakers away as part of promotion with Verizon, with the release of the Pixel 2. Nonetheless, it is also a fraction of Amazon’s market size, with 7 million devices out there to Amazon’s 20 million.

Apple is more or less the Ewok in this story, mostly apart from the main action and really unlikely to topple the Empire unless they are part of a very unlikely series of narrative conveniences and somehow pair up with the rebel alliance. The main hurdle, according to most analysts, is that Apple is highly unlikely to discount its high-end, premium sound-focused speaker. The concern is that Apple has essentially misunderstood what people are looking for in a smart speaker.

But, while Amazon has an early lead, most of the marketplace remains undecided, and stunning reversals happen in retail every so often. Amazon’s performance is the most sizzle-worthy today – but there are many more innings left.

Whatever the outcome, the increasingly pitched competition was certainly the story of holiday 2017 – and certainly worthy of sizzle of the week.

And they didn’t even have to have a lightsaber battle.

Sizzle

Assistance from Digital Assistants: Talk about a skillset. Amazon’s now top 25,000, showing the steady march of voice-activated virtual assistants in the context of everyday life. As many as 300 new skills came into availability this past week, which means that elusive 25,000 mark was surpassed. Alexa for Business is also on its way, meaning you’ll get to show off your mad skills as a captain of industry, too.

Baby You Can Drive My (Electric) Car: Toyota is aiming to make every car it sells available in an electric or hybrid model by 2025, with a wider range of geographic presence, first in China and then in Japan, India, Europe and the U.S. Eco-friendly, then, is getting full attention and involvement from Toyota, which had lagged rivals, and now is going full electric (boogie ooogie oogie oogie).

Package Lockers, Physical Goods Protection: Physical goods need some physical protection, and package locker firms are seeing booming uptake in the holiday season to battle porch pirates. It’s a sad day when gifts have to be locked away. But then again, firms like Luxer One, whose lockers can be set up at apartment complexes and elsewhere, are seeing double and triple digit percentage gains in deliveries to its lockers, which indicates that the business model is taking off.

Fizzle

Stitch Fixed, Not Really, and Neither Are IPOs: The online styling firm saw its shares slump 10 percent earlier in the week, on the heels of an earnings beat that showed attendant caution on margins. Much has been made of how in the coming months, the IPO market might rebound even more than it already has. But investing in growth initiatives hits margins short-term, which implies earnings pressure – and further shows that in the end, numbers matter.

Censorship Gains Ground: Censorship wins a round in China, where Facebook and Google have to abide by the government’s mandates to store data locally and curtain access to certain sites. Could be a heavy price to pay to operate within the country.

Toys”R”Us and the Pitfalls of the Hybrid Retail Approach: Where some brick-and-mortar players thrive into the holidays, sales here are down by 15 percent or more, which will hit plans to shift operations online … and could make this a story of “Toys Were Us.” Sometimes a hybrid strategy, loaded with debt, is not an optimal one, and the company is considering shutting down an additional 100 stores.

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