Amazon reportedly lost more than $25 billion in its devices division between 2017 and 2021 as part of a failed commercial strategy by founder and former CEO Jeff Bezos.

The Wall Street Journal (WSJ) reported Bezos’ approach included selling devices such as Echo speakers at a low cost to get customers to pay for additional Amazon services such as security or to shop online using the Alexa voice assistant.

The news site compared the business model to Gillette selling razor handles at a low price to make money off the purchase of refill blades.

But instead of purchasing more services, customers were more inclined to use Echo devices for free apps that set alarms or provide weather updates, WSJ reported.

“We worried we’ve hired 10,000 people and we’ve built a smart timer,” stated a former senior employee to WSJ.

The story explained Amazon uses a “downstream impact” model that assigns a financial value to a service or product based on how customers spend within its ecosystem after they purchase a device.

The news site’s sources stated the downstream impact model didn’t work with the sale of Echo devices.

After replacing Bezos as CEO three years ago, WSJ noted Jassy conducted a profitability review of the company’s business divisions including the device division.

His teams focused on the Alexa voice assistant and Echo device and he tasked them to find ways to monetise the device and its technology.

WSJ reported Amazon could launch a paid tariff for Alexa this month as part of planned revamp for the voice assistant that could also include AI features.

A representative from Amazon told Mobile World Live (MWL) its devices and services organisation “has established numerous profitable businesses for Amazon and is well-positioned to continue doing so going forward”.

The spokesperson went on to hint that the loss leader retail strategy is one that Amazon supports: “As a company, we measure and review our businesses through different lenses. One such lens is how each of our various businesses can help each other grow,” the spokesperson said.

Amazon’s Kindle e-reader is a successful example of the downstream impact model as customers that buy it often purchase books or audiobooks from the e-commerce company or sign up for Kindle Unlimited.