Amazon Is Bringing the Echo to India and Japan. Here's Why It Matters

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Just after announcing a slew of new Echo devices, Amazon.com (NASDAQ: AMZN) said last week that the new Echo, Echo Plus, and Echo Dot are now available in India by invitation-only, and that the devices will launch in Japan later this year.

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These two markets are becoming more important to Amazon for different reasons. In Japan, Amazon can tap into a consumer market that's eager for smart home speakers and use that demand to hopefully boost other sales of products on its website.

Additionally, Amazon's smart speaker debut in India plays well into the company's recent investments in the country as it tries to tap the country's burgeoning consumer market.

Let's take a quick look at what Amazon's doing in India and Japan and how launching the devices in both countries will help the company.

Why Amazon wants the Echo in Japan

Japan has been a key part of Amazon's international expansion strategy over the past few years. Half of the original content Amazon created in 2016 was released in Japanese and nearly 12 shows were released exclusively to Amazon Prime members in Japan. 

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Amazon's marketplace has been in the country since 2000, but sales in Japan aren't where Amazon wants them to be. According to recent data from NTTCom research, published by eMarketer, found that nearly 87% of consumers in Japan that shopped on Amazon at least one time in the past month only spent between $9 to $90. 

And Amazon is in need of boosting its Prime membership in the country as well. The same research data shows that just 16.6% of Amazon customers in Japan are Prime members.

By launching the new devices in Japan Amazon is hoping to rope its existing customers further into its ecosystem and get them to spend more time in its marketplace and spend more money. That's already worked in the U.S., where Amazon Prime members who have an Echo device spend 10% more with Amazon than they did before they owned an Echo and they shop 6% more frequently, according to research by NPD Group.

There's evidence that Amazon is launching its smart speakers in Japan at just the right time. An article in the Nikkei Asian Review said a few months ago that, "Japanese players -- despite their prowess in core technologies -- are struggling to keep pace with U.S. rivals" in the smart speaker space. And separate research by Global Market Insight said over the summer that Japan and other AsiaPacific countries will experience "high market demand" for smart speakers in the coming years. 

Echo expands Amazon's current India strategy

Amazon said in 2014 that it would spend $2 billion building out its presence in the country and announced just last year that it would spend an additional $3 billion there. 

Since then, Amazon has been busy building out its India-based marketplace, has released an original TV show in the country (the first of 18) and launched a Fire TV stick specifically for Indian consumers. Its efforts have been paying off already and Amazon CEO Jeff Bezos said recently that Amazon.in is the "most visited and fastest growing marketplace in India." 

Bringing several Echo devices to India could help Amazon differentiate itself from its competitors in India -- Flipkart and Snapdeal -- which don't have any comparable devices. Amazon says that Indian developers will be able to create skills, or apps, for the company's Alexa voice assistant and that 10,000 skills will be available to Echo owners in India when the devices ship later this month.

The company launched its Prime membership in India a little more than a year ago and bringing its Echo devices to the country should help the company continue to build out its interactions with Amazon customers, and hopefully spur more product sales from its platform. 

The larger Echo strategy

There's no guarantee that Amazon's devices will be a hit in Japan and India, of course, but the company is following a proven path of building out a strong market place, offering Prime membership, and then introducing its Echo devices to help lock in users -- just like it's done in the U.S.

RBC Capital Markets estimates that Amazon's Alexa devices could eventually add $10 billion to Amazon's top line by 2020 through sales of the devices themselves and through additional marketplace sales that are placed through the devices. With all of that potential from Echo devices, it's no wonder that Amazon is expanding its device sales in India and Japan. It might take a while before investors see how this strategy plays out, but if things follow a similar path as they have in the U.S. then the Echo devices should be a huge success in both countries.

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Chris Neiger has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.