Amazon Echo owners spend 66% more than average customers of the e-commerce giant, helping the company to sell its voice-enabled devices for a lower price, per a study by Consumer Intelligence Research provided to Mobile Marketer. The average annual spending for Amazon Echo customers in the U.S. is estimated at $1,700, compared with $1,000 for all customers, CIRP said.
Members of Amazon Prime, the company's paid subscription service that offers free same-day, one-day or two-day shipping for most products, spend about $1,300 a year on average. CIRP's findings are based on surveys of 2,000 U.S. consumers who made a purchase at Amazon from October 2016 to September 2017.
Josh Lowitz, partner and co-founder of CIRP, said the spending patterns mean that Amazon can afford to subsidize sales of Echo devices.
CIRP's data on the spending habits of Amazon shoppers indicates that the company's voice-enabled Echo devices are associated with higher spending. That may mean that Echo owners are more affluent than average customers, making them a desirable audience for many advertisers.
Amazon is said to be in discussions with major brands about ad placements on Echo devices, which are powered by the company's voice-activated digital assistant, Alexa. The ad placements may mean that ads appear within content streamed through Echo speakers, or that Alexa may cross-sell additional products as users make shopping lists and research products.
The spending habits of Amazon Echo owners also means that the company can sell the devices as a loss leader if it means gaining a greater share of consumer wallets. Amazon is in heated competition with Alphabet's Google, which makes Google Home virtual assistant speakers, for market share. The companies cut prices on the devices during the holiday season, likely leading to losses of a few dollars on each unit, analysts told Reuters. The Echo Dot has about $31 worth of parts, while components in the Google Home Mini cost about $26, ABI Research said.
Amazon and Google marked down the smallest version of their speakers, the Amazon Echo Dot and Google Home Mini, to as low as $29 from $50, with higher-end versions of their devices costing about twice as much. Amazon's share of the U.S. smart speakers was estimated to be 74%, compared with 26% for Google, CIRP estimated in November. Amazon doesn't publish exact figures of device sales, saying only that it sold "tens of millions of Alexa-enabled devices" worldwide including the Echo Dot and Fire TV Stick with Alexa Voice Remote.
Meanwhile, Apple delayed the shipment of its $349 HomePod speaker until this year. Apple seeks to make a profit on each device, which is powered by its voice-enabled assistant, Siri. The company also seeks to bolster subscriptions of $9.99 a month for its Apple Music streaming service.