Once again, it took Apple just a few years to catch up to Amazon and Google.
As was widely leaked in advance, during its annual developed conference in San Jose, Apple entered the field of voice-controlled, “internet of things” speakers for the home, when it unveiled a connected home speaker dubbed the HomePod, which however won’t be available until the end of the year. The speaker is Apple’s first major new hardware product since the Apple Watch’s release in 2015 – which has been classified by many as a dud – and comes at a time for the company when the tech giant is seeking new revenue streams after becoming heavily reliant on the success of the iPhone.
The HomePod will cost $349, or nearly double what Amazon’s charges for its widely popular, $180 Amazon Echo, which was originally released over a year ago. It will come in white and “space gray.” Some more details on the speaker’s introduction from Bloomberg:
The product was introduced on stage by Apple executive Phil Schiller, who said it works closely with the company’s Music app and will come later this year. The Siri digital assistant has been updated to understand more spoken requests focused on music, he also explained. The device has already entered production, Bloomberg reported last month. It has been tested by some Apple employees in their homes for upwards of a year, according to people familiar with the matter.
As Axios reminds us, it’s not Apple’s first attempt at a home speaker: previously Apple had the ill-fated Apple Hi-Fi, a $549 iPod speaker that was a pet project of Steve Jobs.
Does Apple’s much-belated product have any hope of success? According to Bloomberg, the market for internet-connected speakers and other smart home technology may be big enough to help Apple diversify, although it will face a huge challenge in the face of Amazon which controls 88% of the market:
Shipments of intelligent home speakers surged nearly 600 percent year-over-year to 4.2 million units in the fourth quarter, with Amazon taking about 88 percent share and Google 10 percent, according to consultant Strategy Analytics. Spending on smart home related hardware, services and installation fees will reach $155 billion by 2022, up from almost $90 billion this year, with devices accounting for about half of that, the consulting firm also estimates.
CEO Tim Cook has stressed the importance of Apple’s services business, predicting it will double in size by 2021. The new speaker establishes a bulwark inside the home to lock customers more tightly into these services. It also combats the competitive threat from Google’s and Amazon’s connected speakers: Those don’t support Apple services like Apple Music, which brings in $10 in revenue per user each month. That said, consumers seeking smart home devices may opt both for competing – and far cheaper – hardware and services like Amazon Prime and Google Play Music.
“We want to reinvent home music,” said Tim Cook. Senior VP of marketing Phil Schiller dissed the competition, saying that others have good speakers, but no assistant, and those with a good assistant aren’t great speakers. “None of them have quite nailed it yet,” Schiller said.
It remains to be seen if the legions of Apple faithful will scramble to buy, or if this will be Tim Cook’s latest “Apple Watch” dud.
During this week’s conference, Apple also discussed software upgrades for the iPhone, iPad, Mac, Apple TV, and Apple Watch and debuted new iPad and Mac computer models. However, all Wall Street cares about is the company’s bread and butter, namely the iPhone 8 and whether it will result in a new cadence of record sales. According to Pacific Crest, which earlier downgraded Apple, the answer is no.
Below are the tech specs of the new hardward, courtesy of Bloomberg and Axios:
- Powered by the same Apple A8 processor that is used in some iPhones. “It’s perhaps the biggest brain ever in a speaker,” Schiller said.
- Siri is integrated into HomePod.
- “HomePod can do things like read the news, play music, set up alarms and reminders, check the weather.”
- HomePod can connect to Apple’s HomeKit and control smart home devices.
- Will begin shipping in December in the U.S. and the U.K.
Back in February we reported that as America’s deflationary wave spread through the grocery store supply chain, the scramble for America’s bottom dollar was on, and it prompted America’s largest low-cost retailer Wal-Mart to not only cut prices, but to squeeze suppliers in a stealthy war for market share and maximizing profits, a scramble for market share which is oddly reminiscent of the OPEC 2014 price fiasco and is certain to unleash a deflationary shock across wide portions of the US economy.
As Reuters reported at the time, Wal-Mart had been running a “price-comparison” test in at least 1,200 U.S. stores and squeezing packaged goods suppliers in a bid to close a pricing gap with German-based discount grocery chain Aldi and domestic rivals like Kroger. Citing vendor sources, Reuters said that Wal-Mart launched the price test across 11 Midwest and Southeastern states such as Iowa, Illinois and Florida, focusing on price competition in the grocery business that accounts for 56% of the company’s revenue.
Notably, while Wal-Mart was considering cutting prices to match its competition, the near-monopoly retailer was also seeking offseting cost cuts from its own vendors, in what could lead to a deflationary shock that would ripple across the entire US grocery store supply-chain, with dropping prices leading to margin collapse inside the entire industry, and eventually a default domino effect.
And, as we also reported, as part of the relentless competition among the largest grocers Wal-Mart would have no choice but to proceed with even more aggressive price cuts in the future. The reason for this is that Germany-based discount grocer Aldi had emerged as one of the relatively new rivals quickly gaining market share in the hotly competitive US grocery sector, which already boasts Kroger, Albertsons Cos Inc and Publix Super Markets as stiff competitors on price.
A second Germany-based discount grocer, Lidl, was planning to enter the U.S. market this year, which together with German Aldi would pose a serious threat to Wal-Mart’s U.S. grocery business.
Now, thanks to a follow up by Reuters, we can safely assume that the upcoming grocer price war is about to turn nuclear because the abovementioned German discount grocery chain Lidl, which is opening its first U.S. stores this summer and is eager to capture US market share at all costs, said its products would be up to 50% cheaper than competitors… which are already caught up in a margin-crushing price war.
“This is the right time for us to enter the United States,” Brendan Proctor, chief executive officer for Lidl U.S., told Reuters at a media event in New York late on Tuesday. “We are confident in our model. We adapt quickly, so it’s not about whether a market works for us but really about what we will do to make it work.”
And as first order of business, what Lidl will do is generate huge losses by massively undercutting prices in hopes of capturing market share from established names like Walmart, Kroger and Albertsons. Think Uber but for grocery stores.
There is already a case study of what happenes next, should the two German invaders prove successful. Lidl, which runs 10,000 stores in 27 countries, and German rival Aldi Inc have already upended Britain’s grocery retail market, hurting incumbents like Tesco Plc and Wal-Mart Stores Inc’s ASDA supermarket chain.
Looking ahead, Lidl said it would open its first 20 U.S. stores in North Carolina, South Carolina and Virginia, starting on June 15. Eighty more will follow in the United States within the first year, which Procter said would create 5,000 jobs. Analysts cited by Reuters estimate the company will have more than 330 U.S. stores by 2020.
The stores will be 20,000 square feet in size and have only six aisles. The retailer’s in-house brands will account for 90 percent of the products.
And while the latest German invasion may lead to dramatic changes within the hierarchy of established US grocers, one thing is certain: the US consumer is about to be the biggest winner yet again, as prices for (subsidized) groceries are about to plunge across the nation.