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Illustration: Rebecca Zisser / Axios

Retailers think this is the holiday season of the smart speaker, with Google, Amazon, and other tech firms spending big on marketing and discounts to get their voice-assistant technology into as many living rooms as possible.

David Watkins of Strategy Analytics tells Axios that 14 million smart speakers will be sold globally during the final three months of the year, driven by recent, heavy discounting of Google's Home and Amazon's Echo devices, as well as evidence that Alibaba's Genie is outselling expectations in China.

Why it matters: That is a lot of smart speakers: these devices tend to be bought one or two per home, and there are just 125 million households in the U.S.. Amazon and Google are going all out to move them, not because they earn a profit on heavily discounted sales, but to hook consumers and open up e-commerce and advertising revenue down the road.

Why retailers and brands should worry: Those revenues have to come from somewhere. One possibility is that they will be driven by new marketing spending by retailers and brands specifically aimed at these platforms; another is that these devices will motivate shoppers to do more shopping over the Internet.

Thumbs on the scale: According to Suzanne Tager, senior director of Bain & Company's retail and consumer products practices, Alexa-enabled Amazon devices steer customers toward Amazon private-label, in addition to items they have previously bought. Bain conducted a voice-ordering test across categories using Amazon Echo and found:

  • If a search falls within a category in which Amazon offers private label products, "Alexa first recommends the private-label products, even though these products represent only about 2%" of the total good sold from Amazon inventory, Tager says. Amazon did not respond to emails.
  • RBC Capital estimates that by 2020, 128 million Alexa-enabled devices will be active globally, meaning that a bias towards Amazon or other products on this platform could have a serious effect on the retail industry.

Google to the rescue? Chris Taylor, who formerly ran Target's experimental Store of the Future, cites retail partnerships involving Google Assistant as an example of what might work.

  • Walmart, Costco, Home Depot and Target all allow purchases through Google Assistant.
  • In a test, Gene Munster of Loup Ventures said he found that the Google Assistant's AI seems superior to Alexa's. He said Assistant understood questions better, and that it is rapidly improving. This will become more important as these companies attempt to add capabilities, like complex queries and understanding conversations with multiple participants.
  • But Amazon is not without partners of its own—Best Buy and Starbucks are working with Alexa to sell their products. Pop up stores that Amazon is opening with Calvin Klein in New York and Los Angeles also feature Echo in the dressing rooms.
  • And so far Amazon's lead in the smart speaker race is a commanding 71% market share to Google's 26%. And according to Technalysis Research, 69% of users detect little to no accuracy differences between the assistants.

A rock and a hard place: Tager says that competition resembles "the early days of a classic platform race," where tech companies compete to lock in both users and providers of goods and services.

  • The creation of dominant, high-tech platforms should be eyed warily by those who will be forced to compete or collaborate with those platforms, Tager said.
  • If voice becomes a truly popular means of commerce, brands and retailers will have to figure out how to negotiate yet another layer of technology inserted between them and the customer. "Instead of making sure you're on the first page of search results, you'll have to make sure you're the one or two items that Alexa suggests you buy," she said.
  • Taylor said voice may follow a track similar to the invention of social media—remaining a curiosity for many but a crucial promotional tool for those who figure out how to best reach its most dedicated users.

Go deeper

California to pay off unpaid rent accrued during COVID-19 pandemic

California Gov. Gavin Newsom. Photo: Jay L. Clendenin / Los Angeles Times via Getty Images

California will pay off the accumulated unpaid rent that has piled up during the COVID-19 pandemic, the AP reports.

Why it matters: The move would fulfill a promise to landlords to help them to break even, while giving renters relief, the AP writes.

U.S. announces destinations for 55 million more COVID vaccine doses

President Biden at a press conference on the final day of the G7 summit. Photo: Brendan Smialowski/AFP via Getty Images

The Biden administration on Monday announced a list of countries that will receive the remaining 55 million COVID-19 vaccine doses that the U.S. has pledged to allocate by the end of this month.

The state of play: The White House had previously named the recipients of the first 25 million of the 80 million doses that the U.S. has pledged to export, as it took its first step toward becoming a global vaccine supplier.