How Amazon sunk its talons into your home

Back when Jeff Bezos was trying to get a scrappy startup called Amazon off the ground, the best the entrepreneur could hope for, in terms of establishing a beachhead in a consumer’s home, would be to get some space on a bookshelf.

That ambition, and reach, seems quaint, when compared to the extensive reach of Amazon today. A consumer sitting in her living room, looking at said bookshelf, could be watching Amazon-produced TV (the streaming service with the second-biggest market share behind Netflix), sitting on an Amazon-brand couch purchased on the website (the company launched more than 100 brands last year), checking her Ring security camera (a company bought by Amazon for $1 billion in May 2018), waiting for a grocery delivery from Whole Foods (which Amazon also owns), and contemplating purchases for Prime Day, a company-created consumerist holiday (last year, $4.19 billion in goods were sold in just 36 hours).

All of this is in addition to the company’s dominance of e-commerce, boasting a 38 percent share of all online purchases last year, per research firm eMarketer.

In myriad, and sometimes misunderstood, ways, Amazon has firmly established itself as one of the most pervasive brands inside American homes. It’s not simply a popular way to order products. Thanks to new technology, and an increasingly diversifying line of Amazon-owned or branded products, the company is truly becoming part of everyday domestic life.

Part of the reason this is happening is that this delivery service actually delivers: customer satisfaction is high as the company continues to diversify and grow, collecting more data and leading to improved product and services.

As Prime Day nears, here are the many ways Amazon products and services are increasingly winning the war to dominate American households.

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Alexa, can you control my home?

The company’s footprint inside the home is best exemplified by Alexa, Amazon’s category-leading voice assistant. Alexa currently has a 70 percent market share, per CIRP research, in a category predicted to grow to $7.8 billion annually by 2023.

The increasing sophistication of Alexa—it can be used to control smart phones, TVs, smart speaker devices, and even remotely start cars—has made the device a hub to control the home. And Amazon has big plans to make its voice assistant central to every place you live, investing in programs to pre-install Echo devices in apartments and newly built homes.

Voice-activated shopping hasn’t taken off like some analysts predicted. Because brands often don’t feature in voice commands—consumers would say “buy AA batteries” versus “buy Duracell AA batteries”—some thought this channel offered Amazon a chance to brazenly push its private label products.

But when it comes to being the brains of tomorrow’s smart home ecosystem, Amazon has a huge head start. More than 60,000 products from 7,400 different manufacturers now work with Alexa.

“We think the smart home is in a period of mass adoption and expansion right now,” Nathan Smith, head of the Alexa customer experience team, told VentureBeat. “Classically, it has comprised much more tech-forward earlier adopters, but we’re past that.”

Right now, Amazon engineers are working on machine learning and artificial intelligence improvements that can help Alexa better recognize what users want. Called Hunches, these new features give Alexa a bit more presence and intelligence; for instance, if you say good night and tell Alexa to turn off the TV, it can remind you that the garage lights are still on and ask if you want to shut them off.

Alexa may become more predictive, Toni Reid, vice president of Alexa experience and Echo devices, told CNet. The idea is that Alexa can start to pick up the rhythm of routines, like starting the coffee maker and playing a favorite podcast every morning.

What does this add up to? The better Alexa gets, the most consumers will trust it to make routine purchases. According to Chuck Moore, vice president of Alexa Shopping, Amazon plans to help consumers take care of “low-consideration items,” such as ordering things they forgot while out shopping, and even making the assistant more proactive, suggesting reorders once shopping patterns have been established.

This ability to analyze consumption patterns and remind shoppers feeds into a belief some analysts have that the end goal is so-called “zero-click” shopping; eventually, Amazon will simply send you what it thinks you need, and allow you to return anything you don’t want.

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Stocking your pantry, and decorating your home, with Amazon products

As the so-called “everything store,” Amazon can offer an increasingly vast and dizzying array of options for any product one can imagine. More and more, these products come from Amazon private labels. It’s a small part of the company’s revenue now, just 1 percent of Amazon’s sales, or about $2.3 billion, per Bloomberg News.

But combine the company’s resources, marketing muscle, and unparalleled amount of consumer data, and it suddenly becomes clear just how much muscle the company has to strategically launch a new brand. After a few stumbles in early rollouts, the company now runs 119 private label brands ranging from clothing to cosmetics to consumer electronics.

”Amazon’s private label business has the potential to catch up with Target’s and Walmart’s if Amazon’s business continues to grow at the rate that it has,” Oweise Khazi, director of Amazon Intelligence at Gartner, told AdAge.

Look at two seemingly benign launches that may mean big business down the line. The company’s Presto household essentials line, which features cleaners, paper towels, and the like, now rakes in $350,000 a week, and is competing with many of the established brands in the space, per Retail Dive. In spring of 2018, the company launched Wag, a private-label pet brand, seeking to take some of the roughly $2 billion in annual sales of pet products on the Amazon platform.

Amazon’s in-house brand lineup also includes furniture. Two of the company’s main in-house furniture lines, a modern farmhouse concept called Stone & Beam and a midcentury modern line named Rivet, squarely take aim at the “good value for the money” shopper, selling $800 couches and $1,150 sofas. Since Amazon accounts for 34 percent of online furniture purchases, there’s already a huge audience ready and willing to shop for beds and bookshelves online.

Amazon’s also a huge player in the food business. By controlling a number of online grocery options, Whole Foods, Amazon Go stores, and its own forthcoming grocery chain, Amazon has rapidly cornered a significant part of the $840 billion grocery industry (as of 2018, it represented 30 percent on online grocery purchases). It’s even testing out a liquor delivery service in San Francisco.

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Prime’s evolution, from two days, to one day, to predictive commerce

First it was two-day delivery, a seemingly impossible goal that made Prime membership a must-have for many households. Now, Amazon is rolling out one-day delivery. Last month, the company announced it would be offering 10 million eligible products for one-day delivery⁠—some would even be available the same day⁠—and Whole Foods shoppers could receive deliveries in a matter of hours.

This is all part of the company’s strategy to improve logistics, make membership even more sticky, and monetize Prime’s high-end customer base (82 percent of U.S. households making more than $112,000 per year subscribe to Prime, per investment bank Piper Jaffray).

The 24-hour turnaround not only hurts Amazon’s competitors—Target and Walmart shares dropped on news they’d have to match the offer—it helps lock in future purchases. And since growth in the total number of Prime members has leveled off, investing in a program that increases the profit-per-subscriber makes sense.

This hasn’t been a cheap effort. The company spent $800 million in just the second quarter of 2019 to achieve this goal, and now has a massive logistics network with its own fleet of delivery jets and is even testing sidewalk delivery robots to back up its ambitions. A majority of American households are now subscribed to Prime—estimates suggest that number will hit 57 percent by 2021. This massive infrastructure investment also points to way to potential zero-click commerce.

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Amazon’s neighborhood watch

While the combination of purchase patterns and Alexa data may provide a glimpse of what’s going on inside the house, the company is also getting a better look outside via a growing network of smart home security devices.

In May 2018, Amazon purchased Ring, a company that makes doorbell video cameras, floodlight video cameras, and in-home security cameras, for $1 billion. It’s a smart buy: As Recode reports, the smart security segment’s annualized growth rate is expected to be nearly 30 percent for the next three years.

But it’s also led to questions about security, and how the prevalence of personal security videos can lead to a bit of paranoia. Ring has spun off an app called Neighbors, a popular, video-enabled take on the neighborhood app Nextdoor. On Neighbors, users can share videos between themselves, and in some cases, send them to local police departments. Recode’s Rani Mollas calls it a “fear-based social network” that whips up hysteria without having a significant impact on helping police stop crime, despite Ring’s claims to the contrary.

While Ring and Blink, another Amazon-owned home security camera company, have already raised privacy and security concerns, Amazon is thinking more comprehensively about ways to expand its ability to keep an eye on the neighborhood. In a recent patent filing, the company proposed using a future network of delivery drones as eyes in the sky, adding more cameras to a “surveillance as a service” network. This could work even when customers aren’t at home—Amazon could soon be making fly-by deliveries to your office or your vacation rental.