Virtual assistants are creating new opportunities across the consumer electronics landscape, and smart speakers with built-in AI have proven to be a standout category for today’s industry. Adoption of these voice assistant speakers is an important component to consumers’ entrance into smart home ecosystems, and early-established players have seen success in creating and defining this market. Since Q1 2018, a 75% rise in retail channel exposure and a 30% uptick in brand diversity reflects the influx of involvement seen over the past year from an increasingly robust array of voice assistant speaker brands. This growing participation comes from three main directions as major CE players, audio-centric brands, and voice assistant platform owners all work to increase their respective market involvements. However, these early days of "hockey stick" growth may soon taper off as the market is already starting to show the makings of a maturing consumer electronics product category.

Overall Trend of Voice Assistant Speaker Market

AI Advances Onward

Advancements in AI are leading the growth of the voice assistant speaker market. Virtual assistants are honing their interactions into more natural conversations, and this is the area that is differentiating established players from upstarts. Outside of being adept at controlling our smart homes, virtual assistants are now equipped to automate a lot more of our daily lives with widening support for streaming services, custom routines, predictive actions, and keeping humans connected. Using a virtual assistant to gain information and contact physical businesses is becoming more instinctive as agents like the Google Assistant continue to grow their prowess in two-way conversation.

While Facebook leverages Alexa as the virtual assistant inside its Portal product lineup, the company also notably uses its own AI to facilitate more intuitive video chat, which is a function that many other camera/screen-equipped voice assistant speakers are poised to mimic this year. During a video call, Facebook’s AI impressively tracks a subject, or multiple subjects, as they move throughout the frame, with the camera zooming out to accommodate new participants, or zooming in to focus the dialog. This adds a dynamic element to conversations that gives a more natural feel for viewers and shows the direction that voice assistant speakers are moving to solidify their roles as communication devices.

Types of Virtual Assistants

Despite the voice assistant speaker market trending upwards, we actually lost one player this year: Cortana. Microsoft’s virtual agent is no longer offered with any current hardware across the retail or e-commerce landscapes, and Harman Kardon, Microsoft’s only hardware partner, has now moved on to greener pastures by producing Alexa- and Google Assistant-powered models.

However, the voice assistant speaker industry is poised to see one added virtual assistant in the form of Samsung’s Bixby as the company works to make its Galaxy Home hardware available to consumers. Since its announcement last summer, Samsung has been extremely shy in committing to a launch timeline for the Galaxy Home, resulting in the tech titan notably missing the wave of consumer adoption. Apple is clearly the prime competitor that Samsung is interested in meeting with in the high-margin premium arena, but like Apple’s Siri, Samsung’s Bixby will likely face the same challenges in gaining support outside of the brand’s established user base.

Another noteworthy 2019 event will be Sonos expanding its hardware compatibility beyond Amazon’s Alexa to include the Google Assistant. This is a collaboration that the market has awaited since fall 2017, and Sonos used the annual CES trade show this year to demonstrate the long-awaited Google Assistant integration on its smart speakers. Despite delays and no confirmed release date, Sonos’ CES demonstrations show that beta testing is happening right now, indicating that a functionality-enhancing update could be issued to its portfolio in the near-term.

Voice Assistant Speaker Price Spectrum by Brand

Portfolios Become Differentiated

As AI advances, so do strategies and portfolios as more vendors enter the product landscape and new partnerships are forged. In addition to Amazon and Google themselves, 25 additional vendors side with Alexa, while seven align with the Google Assistant. Interestingly, all of Google’s partners, except a $2,250 Bang & Olfsen, are showcased in brick-and-mortar retail. Comparatively, only 40% of brands operating in Amazon’s ecosystem are found in physical stores, leaving 15 of its vendors as online-only. Additionally, Google Assistant products are found at 100% of the 12 merchants tracked by gap intelligence, but Alexa is left intentionally absent from three chains - Costco, Sam’s Club, and Walmart - which reflects the retailers’ attitudes toward the e-commerce giant.

Amazon and Google follow unique strategies for their respective retail stables. Amazon allows audio-focused brands such as Bose, Sonos, Polk, Harman, and Ultimate Ears to operate without its interference in the premium price bands, while Google overlaps with tech-titans Sony, Lenovo, and LG within its brand portfolio. To-date, Alexa remains the only virtual assistant inside retail products priced above $400, although opportunity exists for others as diversity brings differentiation to this nascent market.

Hardware Becomes Differentiated

Expect specification improvements to take center stage this year as early generations in the budding voice assistant speaker market are refreshed by second and third iterations. Where cameras were present on previous hardware, high resolution versions are now implanted on their successors. The sound quality of last year’s units is also being upgraded to “premium” levels with improvements to microphone and speaker technology.

Screen-equipped voice assistant speaker models showed tremendous growth in 2018 and now represent a quarter of the retail landscape (up from 11%). With visual elements enhancing the audio-only experiences offered by voice assistant speakers, it seems only natural that their displays will gain greater resolutions in the ongoing effort for a differentiated position in the market. The popularity of shopping and making purchases using voice assistant speakers also stands to grow from enhanced display technologies, such as the deployment of in-display fingerprint scanning, which is already making headway within the smartphone industry.

Whether it be major CE manufacturers looking to capture a piece of the excitement, traditional audio brands looking to capitalize on their reputations, or the virtual assistant creators themselves carving out a greater influence, the voice assistant speaker market provides an array of opportunities for the year ahead as it marches toward maturity.

For more than 16 years, gap intelligence has served manufacturers and sellers by providing world-class services monitoring, reporting, and analyzing the 4Ps: prices, promotions, placements, and products. Email us at info@gapintelligence.com or call us at 619-574-1100 to learn more.