In the future, we may experience Amazon primarily as a home (and business) operations automation company. A good portion of what we think of as “e-commerce” today may come to largely feel like automated supply replenishment happening in the background.
Amazon and Home Automation Infrastructure
In a certain sense, Amazon’s hardware strategy for the home is “boring.” Today, the company announced a clock, a microwave, a microphone, and speakers.
None of these products is going to set the world on fire by itself. But rather, they’re each a piece of the overall puzzle of building a system of unified home infrastructure that connects the hardware we see and touch every day with intelligent services that hold the data we need for daily life.
Today’s announcements are a clear indication that Amazon’s strategy is to build the nervous system that powers the home, and to build at-least-demonstration-quality hardware (or much better in some instances) in a variety of categories to accelerate the pace of innovation in and growth of the systems it wants to power.
A Subscription Services Future
Over 100 million people around the world subscribe to Amazon Prime today. Millions more likely subscribe to Amazon Music Unlimited. And more are trying FreeTime Unlimited, Prime Channels, Audible, Kindle Unlimited, Pantry/Fresh, and other less-well-known subscription services that Amazon offers every day.
In fact, Amazon has created a subscription service around millions of consumable products it sells. Almonds? Subscribe & Save. Diapers? Subscribe & Save. OTC medicine? Subscribe & Save.
Amazon’s Dash Replenishment Service already re-orders supplies for your home (or business) when it detects supplies are low. (Why order potato chips when your smart potato chip container can automatically keep supply levels above desired thresholds for you.)
As more Alexa-connected devices are deployed in the home (and car), Amazon can provide more varied and sophisticated home services. For example, home security and automated appliance maintenance, just to name a couple related to products announced today.
And with those services comes increasing (and likely higher-margin) recurring subscription revenue. In some sense, selling toilet paper was just step one. (Though we believe Amazon could have improved e-commerce margins in the future as well as private label grows, but will probably just keep prices low.)
Amazon’s product announcements today:
- Echo Dot (3rd generation)
- Echo Show (2nd generation)
- Echo Plus (2nd generation)
- Echo Input
- Echo Link
- Echo Link Amp
- Echo Sub
- Echo Wall Clock
- Echo Auto
- Amazon Smart Plug
- AmazonBasics Microwave
- Ring Stick Up Cam
- FireTV Recast
- Alexa Connect Kit
- Alexa Guard, Local Voice Control, and More Alexa Features
- Alexa Presentation Language
- Alexa Smart Screen Device SDK