• Amazon has faced repeated delays in launching a new AI-powered Alexa.
• Integration with partners like Uber and Ticketmaster has complicated troubleshooting processes.
• Latency and compatibility issues have also caused delays.

Amazon's Alexa seems like the perfect product for the generative AI era.

Getting this powerful technology to actually work well with the digital assistant is a monumental challenge that's been plagued by gnarly technical problems and repeated delays.

Customer-friction concerns, partnership hiccups, compatibility questions, latency problems, and accuracy issues have snarled progress, according to internal Amazon documents and multiple people involved in the project.

The Alexa team is under immense pressure to get something out. A decade ago it launched with Echo speakers and became a household name. But that early success fizzled and the business has so far failed to become profitable, leading to drastic cutbacks and layoffs in recent years.

Some company insiders consider this AI moment to be a seismic opportunity for Alexa, and potentially the last chance to reignite consumer interest in the voice assistant through the power of large language models.

A product of this scale is "unprecedented, and takes time," an Amazon spokesperson told Business Insider. "It's not as simple as overlaying an LLM onto the Alexa service."

"RED" warning

One of the main challenges facing the new Alexa relates to how the digital assistant will interact with other companies and services, and who is responsible for customers if their requests, orders, and payments don't go smoothly.

In late August, Amazon was working on integrating 8 third-party applications, including Uber and Ticketmaster, into the upcoming AI-powered Alexa to handle various user inquiries.

At that time, the goal was to launch the new Alexa around mid-October, according to one of the internal documents obtained by Business Insider. However, it was still unclear which companies would be responsible for customer support issues, like payment and delivery errors, this document stated.

The lack of clarity could cause Amazon to send "frequent" customer contacts to the partner companies. Then, those partners would sometimes redirect the users back to Amazon, the document explained.

"This level of support would cause significant customer friction, when some of the orders/purchases are time-sensitive (meal orders or rideshare trips) and purchase mistakes can be expensive (e.g. buy Taylor Swift tickets)," the document said, assigning it a "RED" warning.

Release dates pushed back

Snafus like this have caused Amazon to push back the release date, almost on a weekly basis, according to some of the people involved in the project, which has been codenamed "Banyan" or "Remarkable Alexa." BI's sources asked not to be identified because they're not authorized to talk to the press.

For example, without more clearly defined responsibilities with third-party partners, Amazon expected further delays in the launch. "Alignment on customer support plans between Product teams and the 3P partners may push this timeline further out if any delays occur," one of the documents warned.

The company had once planned for a June launch, but after repeated delays, it told employees late last month that the new Alexa would launch "no earlier" than November 20, one of the documents said.

A few of people BI spoke with recently are even talking about the Alexa upgrade rolling out in early 2025, which would miss the key holiday period. Bloomberg earlier reported on a 2025 launch plan.

As of late October, Amazon had not settled on an official brand for the updated voice assistant, and instructed employees to simply call it the "new Alexa" until further notice, one of the documents said.

Alexa's huge potential

To be sure, Alexa has significant long-term potential in the generative AI era — as long as Amazon can iron out problems relatively quickly.

Time is of the essence, partly because the existing Alexa business has lost momentum in recent years. According to a recent report from eMarketer, user growth for major voice assistants, including Alexa, has declined significantly in recent years.

The sudden rise of ChatGPT has showcased what is possible when powerful AI models are integrated smoothly with popular products that consumers and companies find useful.

Some Amazon leaders are bullish about the AI-powered Alexa and a new paid subscription service that could come with it. At least one internal estimate projected a 20% conversion rate for the paid subscription, one of the people said. That would mean that out of every 100 existing Alexa users, roughy 20 would pay for the upgraded offering. Amazon doesn't publicly disclose the number of active Alexa users but has said it has sold more than 500 million Alexa-enabled devices.

An internal description of the new Alexa shows Amazon's grand ambitions: "A personalized digital assistant that can handle a wide range of tasks, including drafting and managing personal communications, managing calendars, making reservations, placing orders, shopping, scouting for deals and events, recommending media, managing smart home devices, and answering questions on virtually any topic," one of the documents said.

Customers will be able to access the new Alexa "through natural language using voice, text, email, shared photos, and more across all their devices like Echo, Fire TV, mobile phones, and web browsers," it added.

Amazon CEO Andy Jassy shared a similar vision during last month's earnings call, saying the new Alexa will be good at not just answering questions, but also "taking actions."

In an email to BI, Amazon's spokesperson said the company's vision for Alexa is to build the world's "best personal assistant."

"Generative AI offers a huge opportunity to make Alexa even better for our customers, and we are working hard to enable even more proactive and capable assistance on the over half a billion Alexa-enabled devices already in homes around the world. We are excited about what we're building and look forward to delivering it for our customers," the spokesperson said.

Smaller AI models

Still, the project has grappled with several challenges, beyond customer friction and partnership problems.

Latency has been a particularly tough problem for the AI Alexa service. In some tests, the new Alexa took about 40 seconds to respond to a simple user inquiry, according to three people familiar with the test results. In contrast, a Google Search query takes milliseconds to respond.

To speed up, Amazon considered using a smaller AI model, like Anthropic's Claude Haiku, to power the new Alexa, one of the people said. But that dropped the quality and accuracy of the answers, leaving Amazon in limbo, this person said. In general, smaller language models generate quicker responses than larger models but can be less accurate.

Amazon had initially hoped to use a homegrown AI model, one of the people said. Last year, Alexa head scientist Rohit Prasad left the team to create a new Artificial General Intelligence group at Amazon. The stated goal of the new team was to create Amazon's "most expansive" and "most ambitious" large language models.

However, this AGI team has not produced notable results so far, which led Amazon to consider Anthropic's main Claude offering as the primary AI model for the new Alexa, this person said. Reuters previously reported that Amazon was going to mainly power Alexa with Claude.

Amazon's spokesperson said Alexa uses Amazon Web Services's Bedrock, an AI tool that gives access to multiple language models.

"When it comes to machine learning models, we start with those built by Amazon, but we have used, and will continue to use, a variety of different models — including Titan and future Amazon models, as well as those from partners — to build the best experience for customers," the spokesperson said.

The spokesperson also added a note of caution by highlighting the difficulties of successfully integrating large language models with consumer applications. These models are great for conversational dialogue and content creation, but they can also be "non-deterministic and can hallucinate," the spokesperson added.

Getting these models "to reliably act on requests (rather than simply respond) means it has to be able to call real-world APIs reliably and at scale to meet customer expectations, not just in select instances," the spokesperson explained.

New risks

In late August, Amazon discovered several new risk factors for the AI Alexa service.

Only 308 of more than 100,000 existing Alexa "skills," or voice-controlled applications, were compatible with the new Alexa, presenting a "high risk for customers to be frustrated," one of the documents explained.

Some older Echo devices would not be able to support the AI-powered Alexa, the document also warned. And there were no plans for expanding the new service to dozens of overseas markets where Alexa is currently available, leaving a large user base out of touch, it also noted. Fortune previously reported some of these risk factors.

Integration headaches

As of late August, Amazon had 8 "confirmed" partner companies to handle certain tasks for the new Alexa, as BI previously reported. The company hopes to onboard roughly 200 partners by the third year of the new Alexa's launch, one of the documents said.

Integrating with some of these companies has already created headaches. One document said that Amazon struggled to develop a consistent troubleshooting process across every partner service. Companies including Uber, Ticketmaster, and OpenTable have deprecated their existing Alexa skills, further disconnecting them from the voice assistant.

Amazon's spokesperson said that, as with any product development process, a lot of ideas are discussed and debated, but "they don't necessarily reflect what the experience will be when we roll it out for our customers."

Amazon has also anticipated customer complaints, at least in the early launch phase. One internal document from late August stated that the new Alexa was projected to receive 176,000 customer contacts in the first three months of its release. At one point, Amazon considered launching a new automated troubleshooting service for issues related to its devices and digital services, including Alexa, according to one of the internal documents. That was later shelved.

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• Costco has been clamping down shoppers using membership cards that don't belong to them.
• There are still ways to shop without a membership: online, with a gift card, or as a member's guest.
• The extra charges and hassle of workarounds can quickly add up to more than the annual fee, though.

Costco's Netflix-style crackdown on unauthorized membership sharing over the past year raises a perennial question about how to access the jumbo packs of toilet paper, tubs of peanut butter pretzels, 40-pound bags of dog food, and other staples without signing up for a membership.

Access to the warehouse club and its bulk-price deals is primarily reserved for card-carrying shoppers with Gold Star, Executive, or Business memberships, which start at $65 per year and include access for two shoppers who live in the same household (or work for the same business).

Still, there are still ways to shop for Costco's selection without paying the fee.

Here are three ways.

1. Shop online without a Costco membership

While some of Costco.com is reserved for members, non-members are able to buy items through the site's Same-Day option, on Instacart, or with its partnership with Uber Eats, where about 2,000 fresh, frozen, grocery, and household items are available for delivery.

The best prices on those platforms are reserved for members only, so the savings compared to other retailers, like Walmart or Amazon, might not be as substantial for non-members. Uber says members will pay 15% to 20% less than non-members, and non-members may be assessed a 5% surcharge on some orders processed through Instacart.

Analysis from Insider's Reviews team in 2022 found the best prices on Costco items are found in-person at a warehouse, while online member pricing was slightly higher, and non-member prices were higher still.

For example, a 30-roll pack of toilet paper was available at the time in-store for $19.99, but on Instacart cost $21.85 for members and $24.87 for non-members.

The Business Insider team created a sample shopping cart of popular items that totaled $131.10 for a non-member shopping via Instacart, but just $96.60 for a member shopping in-store, a savings of $34.50. In that scenario, the $65 membership fee basically pays for itself after just two trips to a warehouse.

2. Use a Costco gift card without a membership

Another popular workaround is to use a Costco gift card, known as a Shop Card, which allows shoppers to access the warehouse to use the funds.

The hitch with this approach is that Shop Cards are only available for members to purchase and have a minimum value of $25.

That $25 would quickly be used up in one visit, and could be a useful hack for helping friends and family stock up on back-to-school supplies, though you might catch some pushback trying to buy $200 more stuff than your gift card is loaded for.

It's an easy way to let someone explore the club on their own, without the commitment of membership, and if they do decide to sign up, the Shop Card funds are redeemable toward the annual fee.

3. Visit the Costco warehouse as the guest of a member

Costco's policy allows members to bring two guests with them to the warehouse, but once again there is a hitch: only the member is allowed to pay for purchases.

As with the Shop Card hack, this approach depends on a fair amount of trust between the member and the non-member, not to mention coordinating schedules to make a trip to the warehouse and sort everything out on Venmo afterward.

Bottom line: It probably makes sense to just pay the fee

Given the costs and complications of trying to avoid shelling out the $65 membership fee, it may make more financial sense to simply pay the charge, especially for shoppers who expect to make more than a couple Costco trips per year.

An Business Insider's Reviews team found, the prices of bulk-size items can add up quickly, and shaving a few percent off in fees means the breakeven point comes after just a few trips.

As the company puts it, "rest assured that the cost of membership can be recovered quickly thanks to massive price savings once you start shopping."

The math starts to get even more interesting when considering whether to upgrade to the $130 Executive level.

Either way, the real kicker is even simpler: if you don't think the membership is worth it, you can get a refund.