Amazon.com Inc.’s (NASDAQ: AMZN) Echo Dot can run an entire house, nearly. That makes it remarkably useful, so it is odd that Amazon would cut the price of the second generation Echo Dot by $20 to $29, which is a 40% cut.
Amazon has been known to offer some of its products at low margins, or even at losses, to bring in customers and create loyalty around the brand. It is hard to argue with the approach, particularly given the surge in Amazon’s share price, which has taken its market value to $560 billion. The stock is up 366% in the past five years to $1,162 a share.
It would not seem Amazon has to cut Echo Dot prices. When the company announced record Cyber Monday sales, management reported:
Customers ordered hundreds of millions of products on Amazon from Thanksgiving through Cyber Monday.
Cyber Monday 2017 is now the single biggest shopping day in Amazon’s history, surpassing Prime Day 2017.
Amazon App orders on Cyber Monday 2017 increased more than 50 percent, worldwide year over year.
On Cyber Monday, the best-selling item was the Echo Dot.
The Echo Dot is, according to Amazon, a “hands-free, voice-controlled device that uses Alexa.” Alexa is an intelligent personal assistant. It has voice recognition features and the ability to connect to consumer electronic devices. Thus, it can answer questions, turn on music, set home temperatures, set alarms and allow people to use their smartphones hands free. Many people who own the devices say they cannot imagine a time when they lived without it.
Google has the only real competition for the Alexa-powered products. As is always the case, Apple wants a piece of the smart house, smart device pie. eMarketer claims that the use of this sort of device rose 129% last year. That increase will continue as the sales of products like Echo Dot continue to grow rapidly.
Amazon’s discount could be part of its old trick of buying market share. If so, it seems to be working, based on its own statements. Whether it is a worthwhile market to own, or just another living room toy, remains to be seen.