Posted by msmash from the closer-look dept.
Amazon’s strategy to set prices low for Echo speakers and other smart devices, expecting them to generate income elsewhere in the tech giant, hasn’t paid off [paywalled]. From a report: Amazon’s Echo speakers are the type of business success companies don’t want: a widely purchased product that is also a giant money loser. Chief Executive Andy Jassy is trying to plug that hole — and move away from the Amazon accounting tactic that helped create it. When Amazon launched the Echo smart home devices with its Alexa voice assistant in 2014, it pulled a page from shaving giant Gillette’s classic playbook: sell the razors for a pittance in the hope of making heaps of money on purchases of the refill blades.
A decade later, the payoff for Echo hasn’t arrived. While hundreds of millions of customers have Alexa-enabled devices, the idea that people would spend meaningful amounts of money to buy goods on Amazon by talking to the iconic voice assistant on the underpriced speakers didn’t take off. Customers actually used Echo mostly for free apps such as setting alarms and checking the weather. “We worried we’ve hired 10,000 people and we’ve built a smart timer,” said a former senior employee.
As a result, Amazon has lost tens of billions of dollars on its devices business, which includes Echos and other products such as Kindles, Fire TV Sticks and video doorbells, according to internal documents and people familiar with the business. Between 2017 and 2021, Amazon had more than $25 billion in losses from its devices business, according to the documents. The losses for the years before and after that period couldn’t be determined.
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