This holiday season was a record-breaker for Amazon and the news helped to lift shares of the e-commerce giant by 1.5 percent in Tuesday’s post-holiday trade. According to a statement to shareholders by Jeff Wilke, Chief Executive of the company’s consumer division, the Amazon Echo and Amazon Dot were hot sellers this year.
In fact, the devices sold so well that the company reported problems in maintaining inventory. The challenge was not production delays, rather the company had failed to predict a near nine-fold increase in sales.
These voice-controlled devices help users to conduct several tasks from answering questions, controlling lights, and,when linked with other Internet of Things (IoT) devices, monitoring home security systems. While the Echo was released in 2015, sales have really taken off this year.
According to the technology research firm, Gartner, there are roughly seven billion IoT devices in the world today and that number is expected to grow to more than 20 billion by 2020. Virtual assistants or smart hubs, such as the Echo are a key step to linking the home-management devices with a centralized controller, which is then connected to a smartphone for remote use.
It is no secret that mobile is big and Amazon noted that nearly 72 percent of its customers used their mobile devices to shop online this holiday season. This represents a dramatic increase from previous years and potentially points to a change in shopping behavior amongst Amazon customers.
A key driver in the move to mobile has turned out to be the company’s Prime program. Ken Perkins, President of Retail Metrics, noted that ‘prime customers are spending twice as much as other customers using Amazon.’ Not only does this show the success for the program it points to the fact the Prime customer see value for money when it comes to the annual subscription fee.
This is an important development for Amazon. While the company has continued to grow, it has struggled to increase its razor-thin profit margins when faced with stiff competition from brick-and-mortar retailers who have finally woken up to online shopping.
As such, the subscription model helps the company bolster customer loyalty while offering several value-added options, which have little or no cost. The biggest of these, at least in terms of holiday shopping, is free shipping. The company noted that December 19th was the busiest day this holiday season, with Prime customer’s leading the charge.
In addition, the use of the Echo and the smaller Dot, which relies on Alexa – another Prime service. This Artificial Intelligence (AI) enabled assistant helps to plug users into the myriad of Amazon’s services such as, one-click ordering.
In doing so, Amazon is positioning itself to have an added leg up on traditional retailers while securing the home virtual assistant market against Google Home and the inevitable entrants from Apple and Microsoft.