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Summary

In the run-up to Christmas season, several vendors in the smart home market took advantage of Black Friday and Cyber Monday's shopping frenzy to promote their products with price reductions and exclusive deals. This initiative to boost sales has helped the smart home industry to consolidate and gain ground in the mass market, making it a Merry Christmas for many vendors.

Price incentives boost sales in the smart home industry

The Thanksgiving weekend (including Black Friday and its online counterpart, Cyber Monday) has long been regarded as the beginning of theChristmas shopping season. This year several smart home vendors saw the weekend as a good opportunity to promote their solutions with important price reductions. Many consumers reacted well to the economic incentives, generating important sales of smart home devices on some of the busiest shopping days of the year.

Amazon in particular witnessed record sales of its own-branded smart home devices thanks to an aggressive commercial strategy based simply on price promotions and exclusive deals for Prime members. The company's sales results show that the top-selling products across all categories and manufacturers were the Echo Dot, the Fire TV Stick with Alexa Voice Remote, the Fire Tablet, and the Amazon Echo. Overall, the sales of Amazon Echo product family were seven times higher than on last year's Cyber Monday, representing the best holiday shopping weekend for Amazon devices ever.

Threatened by Google's recent release of Google Home, Amazon wanted to profit from its head-start position and secure its market supremacy in the voice-activated AI smart speaker world by making it more affordable for consumers to buy Amazon devices. Amazon offered discounts of 22% for Amazon Echo (from $179.99 to $139.99), 20% for Echo Dot (from $49.99 to $39.99), and 31% for Amazon Tap (from $129.99 to $89.99). Prime members willing to use Alexa-enabled devices for voice shopping enjoyed even greater savings. For example, they received an extra $10 reduction on Amazon Tap, so that it was $50 cheaper than its original price at $79.99. On top of this, customers who ordered products of $20 or more through Alexa were given a $10 Amazon gift card as a bonus.

The 2016 Thanksgiving weekend marked the first "festive" weekend for Alexa and Amazon voice shopping services. Amazon was aware that this was a good opportunity to make a strong first impression and to position "voice shopping" as a new interface for e-commerce – an important strategy considering Google Assistant's current limitations in the voice shopping space.

Going beyond Amazon devices (but still within the Alexa-enabled ecosystem), Amazon also offered important discounts for other smart home devices from strategic partners such as Philips Hue, Samsung SmartThings, Netatmo, Canary, August Smart Locks, Sonos, and even Nest. However, Amazon was not alone in offering important discounts on Cyber Monday: Google decided to promote Google Home by reducing its price from $129 to $99. This special deal was available across the US in retailers such as Wallmart, Best Buy, and Home Depot.

Ovum believes that the commercial push by numerous vendors during Black Friday and Cyber Monday has taken the smart home a step closer to the mass market. Now that more smart home devices will have found a place under the Christmas tree, the next step will be to make sure such devices are actively used and not pushed into a drawer gathering dust, and to enable such technology to be more affordable all year round to a greater range of customers.

Appendix

Further reading

2017 Trends to Watch: The Smart Home, TE0003-000972 (November 2016)

Smart Home Case Study: Amazon, TE0003-000936 (September 2016)

Author

Mariana Zamoszczyk, Senior Analyst, Consumer Services

mariana.zamoszczyk@ovum.com

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