Amazon's Alexa-enabled earbuds will face major hurdles in the growing hearables market (AMZN)

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Amazon will be entering a new market as it's set to launch its own line of Alexa-enabled earbuds as soon as the second half of 2019, according to Bloomberg.

Estimated Global Installed Base of Hearables Users will be able to summon the voice assistant by speaking "Alexa" followed by a number of commands, such as placing an online order or music request.

It's important to note that the earbuds will need to be tethered to a smartphone to give users access to Alexa via an installed app. Amazon is reportedly focusing on audio quality as a way to differentiate itself from competitors.

Here's what it means: Amazon sees the rapidly growing hearables market as a significant opportunity to expand Alexa’s presence and knows it needs to shift its strategy to capitalize. In fact, Bloomberg reports that the product is "one of the most important projects at Amazon’s Lab126 hardware division," according to people familiar with the product.

Ear-worn wearables are a fast-growing market. Shipments of ear-worn wearables grew 61% year-over-year (YoY) and accounted for 21% of the total wearables market, which shipped a record-high 59 million units in Q4 2018, according to IDC.
Capturing a piece of the hearables space enables Amazon to expand its voice assistant's presence outside the home. Amazon already has a strong lineup of Alexa-enabled smart speakers and in-home smart products. However, the company has made it part of its strategy to build a stronger presence outside the home: Amazon launched its Alexa smartphone app for Android in January 2018, and began expandingthe voice assistant’s utility in cars in March 2019.
Amazon isn't new to the hearables space, but it needs to launch its own product to take advantage of the growing market. Up until now, Amazon relied on third-party manufacturers to build devices to host Alexa; for example, Bose and Jabra both have headphones that can support the voice assistant. However, that strategy leaves pricing, quality, and marketing in the hands of the device manufacturers. Developing its own product enables Amazon to build and sell a device that is geared to its specific customer base, improving the chances of success.

The bigger picture: Despite the excitement around the Alexa earbuds, the product faces major hurdles that will depress adoption.

As a result of Amazon not having its own smartphone, the success of its device will likely depend on how rivals Apple and Google react. For example, Apple may require a phone to be unlocked in order to access Alexa on the earbuds via the Alexa app. This would add a layer of friction that users of Apple's newest AirPods won't have to contend with.

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