Through product development and acquisition retail colossus Amazon now provides consumers with almost every element of the smart home, aside from the bricks and mortar itself. This situation led customer experience futurist, keynote speaker and author, Blake Morgan to ask, “would it make sense that Amazon take it to the next level and simply start a construction company to build smart homes?”
It is no secret that Amazon has an aggressive expansion strategy, and does not shy away from risk - moving into food retail with their acquisition of Whole Foods, for example, or their recent launch of Prime Wardrobe in the fashion space. Their are also rumours that Amazon is looking strongly at expansions into healthcare and banking, further underlining this idea.
It is also clear that Amazon seeks to take over the smart home market with products like Amazon Echo, a smart home hub enabled with voice control through its ‘Alexa’ smart personal assistant. Its acquisition of smart doorbell start-up ‘Ring’ for more than $1 billion has taken it into external security for residential properties. Amazon has also been developing products that re-order groceries automatically by identifying when they run low, or controlling kitchen appliances remotely, to warm your oven on your way home for example.
Furthermore, Amazon has begun to offer smart home consultancy, where an expert visits the customers home to give them advice on how to make the property more intelligent, what benefits that bings and, no doubt, to push Amazons portfolio of smart home products. While purchases of their smart home products are supplemented by online support services for self-installation by the consumer, as a remote form of consultancy and customer service.
“If Amazon wants to add value to its customers’ lives and continue its path to building smart homes that are not only incredibly popular but also more friendly for the environment, it would consider getting into the business of actually building the entire home,” suggests Morgan. So, would it be such a big step for Amazon to move into construction, what value would it bring to the consumer and how does it change the company’s business model?
Value to the consumer is perhaps the most obvious of these three points. By building a home from the ground up, it better integrates all these smart home products. Where cabling would be ideal but does not suit off-the-shelf purchases, an Amazon Home could be constructed with all necessary cabling already built into the walls. Lighting, security, appliances and HVAC would be controlled “seamlessly” with a central hub, minimizing common issues associated with device to device communication.
This leads on to assessing how it would change Amazon’s business model. While the firm has a strong portfolio of smart home products, it does not yet provide every smart device needed to make an entire residence intelligent. Amazon would need to either develop new products to fill those gaps or achieve that through acquisitions and partnerships. In terms of smart technology, that may not seem too far fetched but an entire smart home is not just a collection of smart products.
The big step here would be the “bricks and mortar,” the actual construction of homes involving surveyors, bricklayers, plumbers and so on. It would require new supply chains, as well as adherence to a new range of regulations, standards and legislation.
For Amazon to become a construction company in the way we understand it today, it would be significant divergence from its traditional forms of expansion. However, gaining that know-how through acquisition of a construction firm maybe one solution. While the development of 3D printed houses may offer a technology bridge to this potential expansion into the evolving world of construction.
The residential construction market certainly offers opportunities. America's housing shortage is at "crisis levels," according to leading real estate marketplace Zillow. Despite the strongest rate of global economic growth in the US for a decade, new home construction remained sluggish in 2017.
In fact, new housing rose less than 4%, short of the 6% expectations. The same is true in the UK where prime minister Theresa May promised to take tens of billions of pounds of housing associations’ debt “off the books” in order to stimulate more residential property building.
While we have used Amazon as the example, the same concepts would be true of other companies with broad smart home product portfolios, namely Google and Apple. Google, or Alphabet, through its subsidiary Sidewalk Labs, is already building entire city districts. This projected vision could see these technology giants competing for customers in the construction market. In different ways these companies are starting to become part of every aspect of our lives, making an Amazon house an idea that does not stretch the imagination very far.
“Who knows soon we might be going to Amazon for everything from groceries to houses,” predicts Morgan, and while it would be big news, it probably wouldn’t be a huge surprise to anyone who follows the rapid rise and expansion of this colossus of “retail” in the widest sense of the word. If this future is realized, would you buy and live in an Amazon, Apple, or Google Smart Home?