Amazon Payments Persuades Small Retailers to Work with 'the Devil'

by Raymond Pucci 0

“Better the devil you know than the devil you don’t know.” Many small merchants have apparently decided to validate this proverb by using Amazon Payments to handle their order transactions. And even larger firms are taking advantage of Amazon’s expanding payments services as the following article describes. Inc.’s relaunch of its online payments business in 2013 was greeted with skepticism. PayPal Holdings Inc. had a huge head start and credit card companies like Visa Inc. already had products that made buying something on the Web as easy as swiping a card.

It seemed doubtful digital shop owners would want to team up with Amazon and share valuable information about their best-selling products and prices. And yet: “There’s a market for selling your soul to the devil,” said Gil Luria, a Wedbush Securities analyst. “When you accept Amazon Payments, you get access to the coveted Amazon customers. The trade-off is you are opening your kimono to your biggest competitor.”

It’s a risk some companies are willing to take. Amazon does not disclose the number of businesses using Amazon Payments, but since the service launched in 2013, more than 23 million customers have used their Amazon accounts to pay for things on other businesses’ websites. Southwest Airlines Co., Gogo Inc., which provides in-flight internet access, and Comcast Corp.’s online tee-time booking site GolfNow all use it. Their ranks tripled in 2015, Amazon said.

No doubt Amazon Payments is savior for merchants who do not have the resources or interest in dealing with a potentially complex web of payments vendors and intermediaries. Amazon is also highly recognizable and trusted by consumers who find products and services from often unknown online merchants.

Amazon typically leaves no survivors in its wake as it pursues ever increasing market share. They recently launched Amazon Fashion as a private label virtual store, expanding their already endless array of product categories. Now with Amazon Payments they threaten the likes of PayPal who leads the online payments market. Retailers and payments companies will find out in due time exactly what kind of devil they are dealing with. Some will undoubtedly find the competition too hot to handle.

Overview by Raymond Pucci, Associate Director, Research Services at Mercator Advisory Group

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