Will Amazon’s Secret Weapon Lead to Explosive E-Commerce Growth?
05 Jun 2018
It isn’t as if Amazon.com (NASDAQ:AMZN) needs any additional advantages in its plans to dominate online sales. The company reportedly accounted for 44% of all e-commerce sales in the U.S. in 2017 and 4% of all retail sales in the country, according to e-commerce analytics provider One Click Retail.
That said, it’s hard to move the needle for a company that generated nearly $178 billion in revenue last year. Amazon has previously identified three main pillars that are currently driving its massive growth: e-commerce sales at its online marketplace, the Prime customer loyalty program, and Amazon Web Services (AWS), the company’s cloud computing operation.
Amazon may have found the next big driver of its business going forward.
A huge increase in sales
A recent study of Amazon shoppers was conducted by Alpine.AI, in partnership with InfoScout. The year-long survey found that Amazon customers that owned an Echo smart speaker significantly increased their spending over the 12 months after purchasing — up 29% overall — giving the e-commerce leader a growing advantage in online sales.
The research provided other telling details about the changes in consumer behavior that occur with the adoption and ease-of-use of voice-activated speakers.
The study revealed that that while the average Amazon customer made about 19 purchases over the course of the year, Echo owners bought items nearly 27 times, showing that the device encourages shoppers to make additional impulse buys. The average ticket size at checkout dropped from $26 to $25 dollars.
The consumer packaged goods category is the biggest winner of this paradigm, as customers with the devices bought these products nearly twice as often as other shoppers. The category includes items that must be replaced more frequently, like pet food and treats, baking and cooking items, shaving and grooming supplies, and oral hygiene items. The products bought most often were from the health and beauty category, which were purchased 53% more often over the 12-month time frame.
A confirmation of sorts
This isn’t the first report of its kind. Earlier this year, Consumer Intelligence Research Partners (CIRP) released data that analyzed the purchases of 2,000 U.S. consumers made between October 2016 and September 2017. The survey concluded that the Echo owners spent 66% more or approximately $1,700 annually, compared to just $1,000 spent by the average Amazon customer. That’s also significantly higher than the average of $1,300 spent by Prime subscribers.
According to Mike Levin, Partner and Co-Founder of CIRP: “An unmistakable trend has started to emerge, that Amazon creates products and services that seek to promote retail shopping and deeper affiliation at Amazon.com. Amazon probably wants the Echo device family to stand on its own as a consumer electronics line, while supporting the greater mission of succeeding as an online retailer.”
Amazon has never detailed just how many of the Alexa-powered devices it has sold, though Alpine.AI puts the number at 50 million. In the third quarter 2017 earnings release, Amazon CEO Jeff Bezos said, “Customers have purchased tens of millions of Alexa-enabled devices,” placing the total north of 20 million. The company has also never provided forecasts for sales of the smart speakers, but in Amazon’s fourth quarter 2017 earnings press release, Bezos said, “Our 2017 projections for Alexa were very optimistic, and we far exceeded them. We don’t see positive surprises of this magnitude very often — expect us to double down.”
We still don’t know for sure the size of the installed base of Echo devices, or how much more customers spend once they have them. However, this latest survey adds to the growing body of evidence that shows Echo owners ultimately end up spending more — which is good news for Amazon investors.