At the beginning of this month Amazon launched an addition to their Dash ordering hardware with the Amazon Dash button. There was a lot of incredulity amongst the media heightened by the unfortunate timing which overlapped with April’s Fool Day.
Why the incredulity?
I would break the cynicism down into two broad buckets:
- The Amazon Dash button has a very singular usage / use case, narrower even the Yo! app which was a bit of a tech fad last year. Critics are at best uncertain that consumers would use them? I generally buy toilet rolls every 4-6 months, do I really need a button for that?
- The Amazon Dash button implies that the hardware required is ridiculously cheap. How many boxes of washing powder, packets of Mac & Cheese or toilet rolls would be required for a button to break even?
Rather than ripping into this into too much depth I thought I would share Benedict Evans’ interesting hypothesis about the Amazon Dash button:
Amazon is trying to eliminate both vendor and brand decisions, and turning itself into a utility company – get your house connected to power, water, gas and Amazon. And choosing which commodity product you need is just another piece of friction to be removed by Amazon’s kaizen
There are some interesting directions that come out of this view point. Let’s break Benedict’s analysis down chunk-by-chunk:
- Eliminating vendor decisions: there are two prongs to this. Firstly, it would reduce the basket size for supermarkets and also reduce impulse purchases. Let’s think about the Walmart ‘beer and diapers’ retail urban legend for a moment – if you weren’t shopping for the diapers, you aren’t likely to have picked up the beer next to it as you would have had no reason to go near those shelves. By implication it is also an attack on some of the categories carried in convenience stores. Given that the button is about ‘just-in-time’ shopping it implies that the users are not likely to have rooms in their lives for big box retailers or CostCo. The buttons are likely to aimed at urban dwellers rather than the suburbs were larger homes and larger vehicles to do the big box store shop are the norm – Sam’s Warehouse is safer than Walmart in this scenario
- Eliminate brand decisions: since sales are diverted from supermarkets this also affects their private label sales, especially where they are acquired by accident as lookalikes stacked next to well-known brands. Challenger brands find that switching becomes much harder as they can’t intercept the customer at the point-of-intent through shopper marketing and the opportunity cost for the consumer gets raised due to the comparative nature of the friction in purchase. It also begs a question about how much it affects the share price of WPP and other marketing combines who have spent big on shopper marketing acquisitions over the past few years. Do buttons offer a net gain or loss of value to them? I do know that the button puts Amazon in a much more powerful position versus vendors in terms of discount pricing to retailer and warehousing. The key to understand the power that Amazon would bring is ‘choosing which commodity product you need…’. The very idea of a product being boiled down to a commodity buy would scare the living daylights of the average brand manager in an FMCG mega-corp
- Turning itself into a utility: for Amazon this is about locking the consumer in via Prime to the consumer life. At the present time, logistics costs have been an increasing proportion of the cost of sales for Amazon, there must be a hope that the scale of grocery shopping will bring down the price of Prime and drive profits higher?
There is no reason why the likes of Tesco, Ocado or Iceland couldn’t have done this. The wider Dash technology would make it easier for consumers to do grocery shopping and reduce the friction of online purchases. Instead they seem to have wanted to reduce cashier numbers inshore and focused on self-service tills. Time will tell if they made the right technological choice.
What about the user?
This is designed to make the consumers life easier and I can see how it makes purchase of otherwise annoying to shop for items frictionless, but it only works within reason. You can’t have a wall of buttons on the front door of your fridge freezer and just when do you press the button in the bathroom to order up more razor blades or toilet roll? What happens during the run up to Christmas when Amazon has had sub-optimal performance with regards deliveries on occasion? What is the buying frequency required to make the button habit forming, used without thinking about it, without consideration. When does the opportunity cost for the consumer tip in their favour regarding button usage?
What I don’t have yet is a clear understanding on depth and breadth of the customer problem being solved by the Dash button.
The original Dash device was interesting because it represented a rejection of the broader theme of convergence where functionality is subsumed from dedicated hardware into a software layer running on a computer, via a web browser, tablet or smartphone. Instead Dash is a shopping appliance and wouldn’t look out of place in a cupboard full of Braun kit.
The Dash button represents a further evolution of specialist hardware, a brand-specific, tactile hardware interface. It mirrors software like IFTTT’s ‘Do’ application, the Yo! messenger app and the Dimple smartphone button project.
For non-food products like toilet rolls that come in a plastic bale that is quickly discarded, there may not be a barcode to scan in on your Dash device. Instead you would have to ask for a new pack of Charmin’ or more Mach3 razors. Processing each voice message is expensive, which makes the opportunity cost around creating dedicated buttons for certain classes of product much more attractive. Amazon first and foremost is a data-driven company, they will know which product categories that they want to have buttons for. However, what makes on an Excel spreadsheet doesn’t always make sense to the consumer…
Amazon Dash button
Benedict Evans newsletter edition 106
Investing in smart logistics | Fidelity Worldwide Investments
Amazon, in Threat to UPS, Tries Its Own Deliveries | WSJ (paywall)
Supply Chain News: A 360-Degree View of E-Fulfillment Part 1 | Supply Chain Digest
Amazon joins numerous startups in building delivery networks to disrupt Fedex and UPS. | DataFox
The Amazon Dash post
Dimple smartphone button project | Indiegogo
SpinVox: the shocking allegations in full | The Kernel