Amazon Lowers Echo Prices to Gain Foothold in Smart Home

It’s a great time to buy a smart speaker, due to Amazon lowering prices of its six Echo devices on Black Friday. Over the Thanksgiving Day weekend, the entry-level Dot — whose price plummeted from $50 to $30 — became the No. 1 seller on Amazon’s website. Amazon, Apple and Google share the same strategy for smart speakers and their virtual assistants: as an entry point to the connected home. But because home speakers’ functionality is limited, consumers don’t see them as necessary and aren’t willing to pay a high price.

The Wall Street Journal reports that, “Amazon has accelerated price declines in the home-speaker market by selling at slim margins because it wants to hook users into monthly content-subscriptions, its $99 annual Prime membership and shopping on its website.” At the same time, limited and imperfect performance of the devices mean that smart speakers, “have a long way to go before consumers perceive them as necessary, or as valuable as other major consumer electronics like smartphones, TVs and laptops.”

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Analysts say that Amazon dominates with 75 percent of the smart speaker market, “mainly because it arrived first with the original Echo, which sold for $180” in June 2015. The new Echo speaker now sells for $100.

In reaction to Amazon’s new, lower prices, Alphabet “reduced prices on its Google Home smart speaker nearly 40 percent to $79 for a limited time and introduced a lower-priced option, the currently $29 Home Mini.” Apple, whose HomePod is priced at $349, delayed its launch until after the holidays.

“Amazon is all about driving [speaker prices] to the bottom because for them it’s an entry point for e-commerce,” said Constellation Research analyst Holger Mueller. Consumer Intelligence Research Partners reports that average smart speaker prices have dropped more than 50 percent in less than a year, whereas smartphone prices fell 32 percent over a decade.

Smartphone leaders Apple and Samsung, however, keep pushing prices up, mainly because “smartphones were designed to be status symbols used in public,” whereas “Amazon made the speaker a utility to be used at home,” said Mueller. Amazon also debuted “a broader line of devices, with price points for every consumer.”

According to Consumer Intelligence Research Partners, the entry-level Dot, released in October 2016, “accounts for more than half of unit sales for the Echo since Amazon introduced its first smart-speaker.” Google cut the price for its Dot-competitor, Home Mini, 41 percent to $29, but it also “added the higher-end Google Home Max, a larger $399 screenless speaker, with a sound system capable of competing with Apple’s HomePod.”