Andy Jassy, Chief Executive at Amazon, has been driving a cost-cutting review at Amazon to reign in costs, especially in sections that haven’t been profitable, and bring the retail and tech giant back onto a stable footing. Alexa may be in trouble, too.
Sales of consumer goods, like electronics, have fallen in recent months as inflationary pressures hit many households. At 38% market share, Amazon has the majority share of online commerce, but its market share has stagnated in recent years. Many new entrants to the online sphere are in direct competition with Amazon.
The Amazon Devices Unit, which includes Alexa, has been the recipient of enormous amounts of capital but has an operating loss of more than $5 billion annually. Many of these employees will find themselves without employment in the coming months, as notice comes that up to 10,000 staff will be laid off.Alexa was a pet project by Amazon founder Jeff Bezos. It was intended to be sold via low-cost hardware to the mass consumer market.
When released in 2014, the intention was to sell products from the Amazon website to generate revenue when orders were placed through Echo hardware using Alexa as the interface between the customer and the system. Though Alexa fielded millions of interactions each week, most were to play music or ask for mundane things like a weather report. These interactions meant no money in Amazon’s revenue stream.
Amazon’s leadership team has taken a very close look at Alexa. The primary issue facing Amazon executives is that a recent report indicated that people still use very few Alexa functions, so injecting further capital into this functionality seems futile. Amazon responded by claiming that usage of Alexa functionality has climbed by 30% in the past year.
The most popular features of Alexa have mostly stayed the same since it was first released. The elements used most often by customers are shopping, playing music, and controlling functionality in smart homes. Management indicates that Amazon is committed to Alexa, and there are no plans to discontinue this service. The software remains an integral part of Amazon’s stable of products, but with a reduced workforce.