Amazon Dash Button: Another Blow to Brick & Mortar Retail

by Tim Sloane 0

First I laughed. Then I went to Amazon and asked to be added to the invitation only list! This ABC News item describes the new Amazon Dash service. The short story is that Amazon dash is a small button that can be placed anyplace in your house and when pressed will place an order for the item you have assigned to it. Running low on that K-Cup coffee order? Push the button!

“Amazon is bringing its one-click ordering system to everyday life with the introduction of the Amazon Dash button.

While the thought of pressing a “Tide” button on your washer to re-order more detergent may seem like an early April Fool’s Day joke, Amazon said the service is real and will be rolled out to Prime members on an invitation-only basis.

The buttons will be branded with some of the most common household products made by participating brands, letting users easily re-order Huggies diapers to Gillette Fusion razor blades.

Each Dash button comes with adhesive so it can be stuck in a convenient place for when it’s time to reorder. The buttons only respond to a single press, meaning that you won’t have to worry about any trigger-happy kids accidentally ordering 50 rolls of paper towels.”

The buttons are set up using the Amazon app on your smartphone as described on this Amazon web page and are expected to be available in the fall:

“Dash Button is simple to set up. Use the Amazon app on your smartphone to easily connect to your home Wi-Fi network and select the product you want to reorder with Dash Button. Once connected, a single press automatically places your order. Amazon sends an order alert to your phone, so it’s easy to cancel if you change your mind. Unless you elect otherwise, Dash Button responds only to your first press until your order is delivered.”

A NY Times article describing Dash adds implementation details, business arrangements and future extensions to the service:

“Buried in Amazon’s release documentation is a description of the Dash Replenishment Service, or D.R.S., a way to build reordering products from Amazon directly into household devices.

For example, Whirlpool, one of Amazon’s test partners, will soon offer a washing machine that detects when you are running low on detergent and automatically order a new box for you from Amazon. Quirky, the online retail and manufacturing start-up, will sell a smart coffee pot that can reorder beans from Amazon before you run out. The idea with Dash is that the coffee pot will order beans, coffee filters and a water filter — and be able to measure the use of all three and order each one separately when needed.

Initially, the program will pair with only a few device makers that plan to build the replenishment service into their products.

But Amazon’s description serves as a call to arms for developers, a bet that the future of at least some of Amazon’s retail operations will rely on the proliferation of interconnected smart devices, the so-called Internet of Things. In short: The more connected devices there are hooked up to D.R.S., the more people may avoid their local grocery store and order their everyday items from Amazon instead.

This is classic Amazon business strategy. The company makes little to no money on some projects, like sales of its Kindle Fire tablet, but instead pushes it as a portal for customers to order more things like books, movies and music from Amazon. Similarly, while Amazon would most likely not make money on device sales from partner manufacturers, it could see increased demand through automated ordering.

There is another added benefit. Amazon is one of the world’s largest data-driven retailers, collecting huge amounts of information on the things we buy and how often we buy them. If Amazon’s connected devices service takes off, it could provide the company with much more data on the types of things we regularly shop for.”

It is hard to imagine how convenience stores, supermarkets and big box stores can mitigate the damage this product might cause to average basket size and number of times a consumer shops. Shoppers often go to the market because they have run out of a staple and while milk and eggs will continue to drive consumers into the store, those consumers may no longer need to also pick up detergent, coffee, diapers, sugar, drinks, trash bags or hundreds of other daily items.

The impact on merchants will be large, as will the impact on our environment as people as lazy as I am increase the number of items that are shipped individually in huge cardboard boxes. The next invention for Amazon must be in cooperation with shippers to create reusable shipping containers, since I can no longer get my car into the garage with all those Amazon boxes in the way!

Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group