Amazon, our beloved online bookstore, has been making a lot of moves these days, some of which people cannot understand. Let’s start with the infamous Amazon Dash buttons. For those who do not know what they are, they are small devices topped with a push button that allow consumers to order and pay for a single household item they need to restock, with the press of a button. There is one button for a single product, so those who want to replenish fifty items in their house will need fifty buttons. When Amazon first released these Dash Buttons in March of 2015, the release was met with…well…laughter and confusion; so much so that many folks on the internet and in social media suggested that the announcement was just an April Fool’s joke. Now that reality has set in, the same people who thought it was a joke now seem to think that it is just a futile product by Amazon, one that was poorly planned and destined to fall off the same cliff as Google Glass. I would agree with that sentiment if the Dash Button was Amazon’s end game, but it is far from it. I believe the Dash Button is Amazon’s strategic plunge into linking IoT technology with their online store. I am so confident that Amazon knew what it was doing that I believe these Dash Buttons were masterfully created to lead Amazon’s foray into taking complete control of the ecommerce industry as we head into the IoT revolution.
Let’s step away from the buttons for a minute and look at what other ways Amazon has positioned itself to get ahead of the upcoming Internet of Things outburst. Firstly, Amazon has wisely enhanced its Amazon Web Services (AWS) platform to include AWS IoT, an IoT development platform that allows users to connect their smart devices to the cloud, manage their devices and security, store data and perform analytics, amongst other services. AWS is considered by many as the leading IoT platform in the space. Amazon has certainly developed this platform to establish its brand beyond ecommerce, but they will find themselves in tight competition with Microsoft, IBM and tens of other companies selling the “best” end to end solution. They can certainly try and be better than these other platforms, but I think they are well positioned to be different. Sure, it is possible that they want to best Microsoft’s efforts in partnering with BMW and Google’s testing of autonomous cars and try to be a leader in the connected car vertical. Or maybe they want to topple IBM’s efforts in artificial intelligence and become the industry leader in robotics. Though that is possible, it doesn’t sound right to me. What if Amazon is not competing with Microsoft, IBM and Google much at all, but are using similar concepts to strengthen themselves in the market they have known and excelled within for years?
The same line of thinking can be applied to the most intelligent of all personal helpers, Alexa and the Amazon Echo. Once again, Alexa could simply be Amazon successfully creating a better technology than Apple’s Siri, or Microsoft’s Cortana to efficiently bring the customer news, weather report, sports scores, answer a myriad questions, and order Lyft rides. And though I am sure that is true to some extent, I believe they built this with the primary purpose of simplifying the purchase process for customers to order items off of Amazon with just a single command. Although, I am sure Amazon is excited to fetch you Lyft rides and inform you of the weather, they will be a little more excited to know that when you tell Alexa you need some detergent, she is going shopping at one place and one place only, the Amazon store. The simplicity of one command ordering brings Amazon’s retail store one step closer to being a one stop shop. The revenue gain there is far greater than that of the $200 per unit Echo.
Let’s examine for a moment what the Internet of Things is generally set up to accomplish, and how Amazon can ride this wave to continue to cement itself as the go-to retailer. In most applications, IoT is being created to automate and simplify mundane tasks, especially in the consumer markets. Autonomous cars are being created to reduce stress and wasted time of driving, by allowing the customer to focus on other aspects of life while on the road. Smart home ecosystems are being created to allow the customer to walk into their house and relax or get work done without worrying about turning lights on and off, thermostats up or down, or finding their TV remote between the cushions. The way Amazon is utilizing IoT is to create efficiencies in the ordering process for its customers, just the way it did on the web when it first launched. When Amazon arrived as the go-to retailer for all regular household items, people started engaging more with them to avoid making a trip to the store. Sitting on your computer and placing an order for the basic items you need saves so much time rather than getting in your car and driving to the store, especially if you have to do so multiple times a week. With IoT, Amazon has made the process even easier for the customer. With Amazon Echo and Amazon Dash buttons, you do not have to make that tiresome trip to your computer, the simple press of a button or command to Alexa will get the products you need delivered to your house in a jiffy. So much for procrastination! If that sounds simple, this sort of semi-automation is just Amazon’s start in replenishing your products as needed from their store. They want to automate every household purchase, which will ensure one thing: absolute customer loyalty not by way of choice, but by way of convenience.
Back to Dash. While all the hoopla is surrounding the “gimmicky” buttons, Amazon also released the Dash Replenishment Service, which allows product manufacturers to link their connected devices with Amazon’s API to the Dash ordering functionality. Subsequently at CES, Whirlpool announced they will integrate Dash technology into their new washers which will allow automatic ordering of detergent from Amazon when the detergent is low; all by measuring the number of wash cycles against the amount purchased. GE, Samsung, Brother, Brita, and a host of others have followed suit. These appliance manufacturers will just have to add sensors to their “dumb” products to measure when replenishable items are low, and enabling the machines to automatically order the product from Amazon and have it delivered to the customer’s door. So what does this mean? This means that the longstanding IoT fantasy of a self-replenishing refrigerator may come to fruition sooner than we thought. This means IoT will once again take care of the mundane tasks people don’t need to do themselves, this time in the retail space. Most importantly for Amazon, this means they will continue to wrestle ecommerce market share away from its competitors.
When Amazon came onto the scene in 1995 as a bookstore, brick and mortar retailers had no idea the magnitude of how Amazon was about to shake up the retail industry. By continuing to expand its offerings, lower its prices, and provide low friction web and mobile checkout processes, Amazon has continued to stifle the competition and increased its market share. In 2015, Amazon generated about 60% of the online sales growth in the U.S., and 51% of all retail growth. Walmart, Amazon’s closest competitor, only had a 9% growth in the same year. They are even about to overtake Macy’s as the biggest seller of clothing in the U.S. Amazon has been consistently growing its customer base by serving as a one-stop shop for all general retail needs at an affordable price in the web and mobile space, and just may finish the job with its IoT efforts.
According to MarketWatch, 78% of consumers say their mobile shopping experience is hindered by friction caused by slow download times and screen size. An auto-replenish device will certainly reduce that friction.
With Amazon’s reputation of having competitive, if not the lowest prices, people will be willing to trust that Amazon will automatically re-stock their household essentials in an affordable way. This convenience will take customers away from the frustrating task of comparison-shopping, which will ultimately result in a blind loyalty to Amazon’s marketplace. Although the Dash Buttons, Echo, and AWS have certainly helped Amazon become a major player outside of retail, I believe in the end their forward thinking creations, all put together, will permanently keep Amazon in control of the ecommerce market, with their competitors fighting for a small piece of the pie. Amazon has quietly crafted an ecosystem, just like Apple and Google have been fighting to do for years in the computer, phone and tablet space; that will encourage customers to adopt their brand through multiple avenues in order to experience an effortless home essentials shopping experience.
In the short term, only “privileged” folks will be able to afford this kind of technology, which will keep Wal-Mart and Target’s hopes alive. On the other hand, there was a time where smart phones were only for “privileged” folks. Eventually the technology will be ironed out, the sensors will be cheaper, and most everyone will be able to experience the lifted burden of shopping for home essentials. And just in case they really want to run to Wal-Mart, I guess it doesn’t hurt that their Echo can call them a car too.