Why Alexa is a big deal?
The little Echo Dot sitting calmly next to my bed never ceases to surprise the futurist in me. I use it for mundane daily tasks like setting alarms and not so mundane tasks like ten minute meditations and listening to the sounds of a babbling brook while easing in to a deep sleep. Its a very interesting product and I wanted to dig deeper and analyze its strategic value to Amazon and explore how transformative it could be to our daily lives. In this essay I hope to present my analysis with some facts, assumptions and hypotheses.
To understand why Alexa is such a big deal its important for us to dive deep in to Amazon’s core revenue drivers and its overall business model.
Amazon has two types of customers: Prime and non-Prime customers. Estimates suggest that there are around 80 million Prime customers in the US and the numbers are growing at a healthy pace. Prime customers are extremely valuable to Amazon because they spend twice as much as non-prime members which means Amazon is constantly trying to convert non-primers to prime. An average prime customer is likely to spend $63,000 on on Amazon over his/her lifetime (See fig.2 and 3). Now imagine 50% of US households signing up for Prime and making all of their purchases on Amazon, the numbers would be truly staggering.
A Prime customer’s average spending is nearly twice the…
