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Apple faces strong competition from Amazon

A new report looking at Apple’s success has highlighted the risk it faces from an unlikely source, namely Amazon.

Earlier this month the company posted a record third quarter for its Q3 2018 results, with revenues of $53bn, driven by sales of iPhones and wearable devices.

The company will soon be the first in history to be worth $1tn, but a new report has highlighted its policy on data privacy as a factor which could hamper its ability to make the best use of data to improve the overall customer experience.

The use of data collected from customers is something that is propelling Amazon, and it is expected the online retail giant will soon surpass Apple’s market capitalisation.

The report, What to learn from Apple’s coming brawl with Amazon by Forrester vice-president James McQuivey, looked at Apple’s huge success with the iPhone and the inherent desirability of its products.

But when compared to Amazon, McQuivey said: “With the exception of the unique brand, Apple’s signature strengths no longer provide the leverage they used to. And even the unique brand doesn’t mean what it used to, usurped by the power of trust built up through repeated convenience. There are general threats to Apple’s dominance, but the biggest shadow cast over Apple’s future is Amazon.”

He said Apple will lose out because Amazon already has most of Apple’s customers, and industry players tend to think more about what Amazon will do next over what Apple will do. “Amazon’s service and convenience-based strategy has superseded Apple’s product-first approach, giving Amazon faster access to new markets,” said the report.

Among the evidence McQuivey presented is the fact that 15 million US homes have smart speakers, the majority of which are Amazon Alexa devices.

Once Amazon adds the recently promised intelligence to Alexa to make conversation more useful and natural, the frequency of use is expected to double, and he expects Alexa adoption will be driven by the urge to put devices in cars, workplaces and hotel rooms.

“This isn’t love so much as persistent usefulness,” said McQuivey. On the consumer front, he suggested Apple should have an Alexa skill for Apple TV control as well as user access to health data – or even just allow Apple Music streaming on an Echo.

Apple’s privacy portal, introduced earlier in the year, proclaims: “Your personal data belongs to you, not others. Whether you’re taking a photo, asking Siri a question or getting directions, you can do it knowing Apple doesn’t gather your personal information to sell to advertisers or other organisations.”

McQuivery said this approach to security has the potential to cripple Apple, especially when business-to-consumer brands are looking for a partner on which to offer a new product or service.

“Apple won’t be a partner in helping you achieve this – it doesn’t have much data to share about your customer, nor does it really offer a marketing platform the way that Amazon, Google, and Facebook do, rendering it less able to help with your brand success overall,” he said.

Keeping up with customer requirements

McQuivey said companies that make a product, collect data through it, but then do not use that data to enhance the experience are not keeping up with modern customer requirements.

“Your customers need to know you’ve turned the data they gave you into outcomes they value. Apple needs to apply AI to the data it has from customers to enhance their home life, health and daily patterns.”

Apple does appear to be making some progress with AI. In the transcript of its recent earnings, posted on the Seeking Alpha financial blogging site, Apple CEO Tim Cook highlighted some of Apple’s development efforts to speed up the coding of machine learning (ML) and augmented reality applications.

“Developers will be able to build even more intelligent apps with just a few lines of code, using the power of machine learning with Core ML 2 and Create ML,” he said.


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