Reimagining the Future with Amazon
In my last article, Why is Amazon a Big Deal?, we have explored why Amazon has been so sustainably successful by centralizing Prime among all its businesses and creating multiple virtuous circles. This week, I’d like to take Amazon forward to the future and reimagine how the future of Amazon will look like in three ways.
Amazon will become a one-stop entertainment giant
Amazon has been rapidly expanding its entertainment arms — Amazon Video, Amazon Music, and its gaming development — through marketing, internal development, and acquisitions. Looking at all the players in the field, Amazon seems to be the only one deeply developing in video, music, and gaming at the same time. This could be the core reason that turns Amazon into an entertainment powerhouse.
In the future, I suspect Amazon will exactly know what music, video, and products you like by building an intelligent algorithm from its millions of user data. Humming music while your Echo is listening? Your Amazon Music will recognize and play the exact same song. Talking about the latest TV series with your family at home? It will appear on the Amazon Video front page. Even if you are a first-time user of Amazon Music, Amazon Video, and Twitch Prime, their suggestions will be crazy accurate because of the algorithm Amazon may build.
Cross-integration of data and cross-selling made possible
How could an algorithm make a difference? let’s first take a look at how Spotify differentiates through its accurate algorithm.
Spotify has always prideed itself on its killer discovery feature — ‘Discover Weekly’ and ‘Daily Mix’ playlists. They are personalised playlists curated just for the user based on the user’s past activities and insights generated from its 140 million active user base.
As Quartz noted:
It begins by looking at the 2 billion or so playlists created by its users — each one a reflection of some music fan’s tastes and sensibilities. In the simplest terms, if Spotify notices that two of your favorite songs tend to appear on playlists along with a third song you haven’t heard before, it will suggest the new song to you.
Such success in personalisation stems from building a right algorithm — and a similar model can potentially bring exponential values to Amazon. Noted again that Amazon is developing rapidly in video, music, and gaming. What if Amazon can develop an algorithm as powerful as that of Spotify in Amazon Music? One step further, Amazon could develop an algorithm that connects data seemingly unrelated to each other and makes extremely accurate recommendations that no others can. Product recommendation can be made across its online store and entertainment services. For example, users who listen to a certain type of music may tend to watch more drama and thriller; users who watch a certain type of movies tend to spend more on PC & Home Appliance, etc. If such a powerful algorithm could be built, the potential of Amazon’s business will be immense.
That will make Amazon the entertainment powerhouse that continually brings advertising revenue and online sales to the table. However, building an algorithm takes time, and Amazon has to first focus on its effort to bring more Prime users on-board to collect sufficient data. Could Amazon make it before Netflix, Spotify, and Apple Music dominate the video and music streaming market?
It is also building an ecosystem
Amazon is not just focusing on the front-end streaming services. Carefully examining its activities and you will discover so much more going on behind the Prime services it provides.
For gaming, Amazon is creating an ecosystem of cloud-based development platforms, game content distribution, and streaming services. Gaming is one of the key verticals for AWS. With its recent acquisition of Gamesparks, as described as ‘the ultimate backend development platform for game developers’, We could foresee its integration with AWS and Amazon Lumberyard, its own AAA game development tool. And there is no doubt that Twitch will continually act as a strong front-end game streaming services for Prime members.
For video, Amazon has been purchasing new content for Amazon Video while building up its own production team. It has recently paid a reported $50 million to stream NFL games and has been continually distributing more diverse content on Amazon Video. More critically, it is becoming a self-distributor with Amazon Studio, a studio ready to handle every step in the lifespan of the films it creates and acquires (Manchester by the Sea, a blockbuster hit was produced completely by Amazon).
Although we could not see any recent development from Amazon related to music other than Amazon Music, Amazon Music is definitely gainly traction to compete with other music streaming platforms like Spotify and the like. The fact that Amazon is already building a full ecosystem around video and gaming creates a promising vision of Amazon as an entertainment hub in the future.
Smart food delivery to your door, fast
Amazon Go went viral on the Internet and its acquisition of Whole Foods took everyone aback. Amazon is making bold moves into grocery, and I believe all the investment it has made related to the food business will eventually come together.
How? Imagine this scenario:
It’s a weekday morning and you are making your breakfast before work. You realized you are soon running out of food. So you asked your Echo (Plus, Dot, Show? Your choice) to purchase grocery.
Alexa recognizes that you:
1. Usually order take-away once a week through Amazon Restaurant
2. Scheduled an upcoming weekend trip away with your housemates
3. Usually like to have them delivered instead of picked up
4. Have recently asked repeatedly for an egg benedict recipe.
Recognizing all the above consumption patterns, Alexa read your grocery list and tell you that your grocery will be arriving tonight.
Leaving the office, you suddenly would like to quickly grab a beer at the Amazon Go/Whole Foods store downstairs. You scanned yourself in with the Amazon app, grabbed the beer and left. The amount is instantly deducted from your credit card.
How? Let’s take a look at all the current Amazon businesses related to food.
1. Whole Foods Acquisition
It is by far Amazon’s largest acquisition of $14 billion. For some of you outside of the US, Whole Foods is a grocery chain in the US accounting for 1.6% of the supermarket market share. Many speculate the reasons behind the acquisition, and I believe these are some wants from Amazon: (1) Consumption pattern data; (2) Distribution hub for online grocery orders (It has prime, upper-income locations); (3) High quality brand perception of Whole Foods and its strong private labels.
2. Amazon Go
Amazon Go is a new kind of store featuring the world’s most advanced shopping technology. No lines, no checkout — just grab and go! If you haven’t watched the video already, go! No store has been opened yet but everyone has been anticipating it already. It is believed that stores will be opened first in the US. It is highly possible to expand globally and sell beyond grocery products.
3. AmazonFresh
AmazonFresh is its own online grocery business. It has been struggling to take off — only 4.5 percent of shoppers made frequent online grocery purchases in 2016, up just slightly from 4.2 percent four years earlier despite big investments from companies such as Amazon. It currently offers 2 pickup locations in Seattle.
4. Amazon Restaurant
Often overlooked, it provides 1-hour food delivery from restaurants in limited cities to Prime members only.
5. Echo and Alexa
Echo can do a lot of things, and there are a lot of Alexa skills that help you use it in your kitchen. You can ask Alexa to maintain you a grocery shopping list. You can ask Alexa to suggest recipes. You can connect Alexa with your kitchen appliances. You can sync your schedules with Alexa. You can ask Alexa, well, almost everything.
What you experienced in the scenario is a complete integration of all Amazon’s food businesses above.
• Amazon Go’s grab and go technology will be integrated into Whole Foods’ retail stores
• Orders in AmazonFresh can be picked up at Amazon Go and Whole Foods
• Alexa will recognize your activities in Amazon Restaurant, Amazon Go, Whole Foods, and Amazon Fresh
• Alexa will further integrate into your life through your daily interaction with her (recipe, questions asked, schedules)
• Advanced anticipatory shipping based on a large amount of consumer data
Yes, this is equally scary and convenient. The question is, would Amazon be able to pull this off? Consumers nowadays are yet to be convinced the concept of online grocery shopping. One-day delivery of fresh food is still a challenge. Amazon Go has yet to open its first store with uncertainty ahead. This would be a far-away vision that takes an insane amount of extremely complex machine learning, data analytics, and careful execution, but this would also be something worth looking forward to.
A different take on Echo
Alexa and echo are about to be everywhere, from the bedroom, to the living room, to the kitchen, and even on your phone and TV. Here is where the challenges begin. With the launch of 6 new Echo devices, it is easy to imagine multiple Echo devices placed in your house, used by multiple household members. However, Amazon has yet to smoothly integrate multiple devices in one place.
Echo does not have a centralized system, yet
Currently, Echo devices do not synchronize each other completely. If you stand between two devices, it will lead to neither responding, or one responding but not understanding correctly, or both attempting to respond. Amazon has a recent update that allows music to synchronize across devices, but the function is still limited. You also cannot tell one Echo device to control the others.
Alexa does not recognize multiple users
Unlike Google Home’s recent support for multiple users, Alexa cannot distinguish between two different voices. This could be a problem when more than one user are using the same set of Echo devices in the house (which is highly possible). As Alexia is getting smarter in syncing users’ calendar and understand their needs, its voice recognition has to catch up.
An Echo is affordable. Multiple? Not so.
The good news is all Echo devices are under $150. The bad news is in order to experience a seamless experience with Echo devices, more than one Echo device are needed. Since it is meant to be placed at a fixed location, multiple devices are needed to get your voice heard anywhere around the place. If you live in a larger place and you would like to avoid walking across the rooms just to talk to Alexa, you would probably have to purchase a few more.
Echo dot — the most affordable Echo device is now priced at $49.99 each. In an apartment, you may need at least three Echo dots, a total of $149.97, to get your voice heard without moving an inch. If Amazon has a vision to make Alexa a home assistant for every household, Echo’s price has to be lower, and there are two ways.
A complimenting Echo device
If the goal is just to make users’ voice heard across the place, the best way is to place an Echo device (let’s say it’s an Echo Dot) at the center and placing other complimenting Echo devices around the place. To make it simpler — let’s call the complimenting device Echo Base. Echo Base will have limited functions — with only a speaker and a recorder. However, all Echo Base are synchronised to the Echo Dot. Once you ask Echo Base a question, it will automatically send to Echo Dot, and all the responses and functions will be centralized.
This will make Echo significantly more affordable and more convenient to everyone. Echo Base will be really affordable, but it expands the power and range of all your existing Echo devices.
Make Echo Dot really affordable
Another way is to divide Echo devices into two categories. Echo Dot, and Echo-others. Echo Dot is clearly the most affordable Echo with the most basic function — this will be a popular item especially for Echo new adopters. By significantly lowering the price of Echo Dot, a lot of customers will be attracted. In this case, Echo Dot can also act exactly like an Echo Base as users purchase more Echo devices at home. Margins will be earned majorly from all other Echo devices.
And, of course, to make the above two solutions possible and better, voice recognition capability and a centralized system should be developed.
It is just the beginning…
It is not going to be an easy journey to realize all the ambitions. It is just the beginning and there are still a lot of battles to be fought. Could Amazon overcome the challenges and transform our future? How did you imagine the future of Amazon? Share your thoughts with me and I am happy to discuss!
I an optimist who embrace the future. In love with tech and marketing. I am graduating soon.
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