How the $100 Echo could cost you thousands
This purchase may echo through your bank account.
Earlier this week, Amazon slashed the price of its popular smart home speaker, the Echo, to $99.99, down from $179. At the same time, it gave the speaker a new look — it now comes in charcoal, sandstone, heather gray and other hues — and enhanced technological features like multi-room audio, easier setup and free calling.
Many consumers are freaking out at the new low price with one tweeting “Christmas sorted!” and another “steal!”. And, indeed, the price is low for a smartphone speaker: Google Home costs $129 and the Apple HomePod is $349.
But analysts told Moneyish that consumers should proceed with caution, as the low price of the Echo may just be the beginning of your spending. “This is the purchase that keeps on purchasing,” says Krista Fabregas, a retail and commerce analyst at FitSmallBusiness.com. “It’s like a vocal charge card.”
Jonathan Hadad, an analyst at IBISWorld, explains that this is because “Amazon wants to be customers’ first and only retail choice, and convenience and simplicity plays a major role in that. By having Echo in the home, Amazon is making it extremely easy for customers to order goods from Amazon; all they have to do is say what they want, and it’s ordered and delivered to their door.”
What’s more, he adds that the “Echo could very well be a loss-leader for Amazon. At the end of the day, Amazon is a retailer, not a product developer, so the company is primarily focused on attracting customers and becoming their go-to retail shop. Amazon may just want to get in customers’ homes to increase their frequency of orders, Echo price notwithstanding.”
Most likely, Amazon hopes that the Prime-effect — the fact that people with Prime spend way more ($1500 versus $625) than those without it — will also become the Echo-effect, where people who can simply shout at Alexa to buy paper towels or bananas will end up buying more. (Amazon has not yet responded to our request for comment.)
And Fabregas says they might just get there. Amazon has already sold 15 million Echos, and she thinks with this new price point they will sell many more. Courtney Jespersen, the consumer saving expert at Nerdwallet, adds that the low new price tag, “could be a determining factor for undecided home speaker consumers.” Already, Amazon encourages consumers to shop on the Echo with Alexa-only deals. And during Prime Day this summer some of its best deals were Alexa exclusive.
Of course, there’s no reason you can’t resist buying things on the $100 Echo, especially if you simply relegate it to playing music or for cooking times. “Amazon is providing consumers with multiple entry points to its speaker lineup, depending on what works for their budget,” says Jeppersen. “Consumers can pick the product that best serves their needs.”
© 2017 Dow Jones & Company, Inc. All Rights Reserved