Or (The Future of Amazon Prime).
Amazon Dash Buttons have been written off as a misguided corporate strategy, a failed product, a gimmick, an April Fools Joke, or as (my favorite) a symptom of Amazon’s slow spreading disease. Though the buttons are an easy punching bag, their criticism is short-sighted. Amazon Dash Buttons are one way Amazon plans to increase engagement across its Prime ecosystem and give customers less of a reason to shop anywhere else.
If “people will want to buy more than just books on the internet” was Amazon’s big bet of the 1990’s, then Amazon Prime is their big bet of today.
With many buyers and sellers, homogenous products and near perfect information, it is a textbook example of perfect competition. If a firm in perfect competition raises prices, buyers will go elsewhere.
If Amazon can’t raise prices without losing market share, how can it grow?
Prime is the Amazon’s solution to the perfect competition problem. Even if Amazon can’t raise prices, it can always raise Prime membership fees (as it did in 2014 by $20).
In order to raise membership fees Amazon must increase the value of Prime for members by bundling other products with Prime. To date Prime Instant Video has been Amazon’s most valuable addition to Prime.
Prime Music and Prime Photos are other products Amazon hopes will increase value for Prime members. By bundling them together Amazon is creating a quasi-monopoly of its own.
Amazon is removing friction from the buying experience.
The bundling of these services has an additional benefit: increased engagement within the Prime ecosystem. You’re watching TV with your Amazon Fire Stick and an ad comes on. Now you can buy it right then and there, no Google, no friction. Amazon becomes the starting point for online purchases and gives customers less of a reason to shop anywhere else. Amazon does not have to abide by the laws of perfect competition when customers stay within the Prime ecosystem. It can set prices (to a degree) and buyers will remain loyal.
The company gave up millions in shipping revenue its first year when Amazon launched Prime with free Super Saver Shipping. Amazon wagered that if it could achieve scale it could significantly reduce the cost of shipping and turn a profit. With Prime Now, Amazon is doubling down on this bet. Prime Now offers members free two-hour delivery on tens of thousands of its most popular items. Prime Now streamlines the buying experience for customers and is another way Amazon plans to keep customers within its ecosystem. If I know Amazon can get me what I need faster than anyone else, why would I shop anywhere else?
Dash Buttons are another way in which Amazon is removing friction from the buying experience. More on that in the next section.
The Dash Button Lifestyle.
Ilive in San Francisco with 3 roommates and for the past two years we’ve been out of paper towels approximately 90 % of the time. Someone orders Postmates every single day. Didn’t I buy the paper towels last time?
I ordered a Bounty Dash Button two months ago and for the first time in a long time I’m certain there are paper towels at the house. , if we’re close to running out someone will press a button and we’ll have it in two days.. When I see the order show up on my phone, I just Venmo everyone. Paper towels are about $8 more on Amazon than at Safeway (thanks Dash Button Dudes) but divide that between the four of us and it’s a small price to pay for the convenience.
The experience might not be compelling enough for everyone, but it is for us. We’re ordering more stuff from Amazon, more frequently, and couldn’t be happier about it. Life inside the Prime ecosystem is so easy that we have little reason to shop anywhere else.
For me and my Dash Button, showing up after a long day of work to a fully stocked cupboard was a magic moment– but I’m unique. Amazon Dash Buttons aren’t universally magical right now, but combined with Prime Now’s free two-hour delivery they will be.
Push a button and have toilet paper appear at your front door– now that is a magic moment.– Tweet This.
Amazon is also investing in voice recognition– just say the word “toothpaste” in front of your Amazon Echo and poof! With Amazon Dash Replenishment your GE washing machine knows when you are running low on detergent and orders it for you.
The end result– be it Dash Buttons, Replenishment, Echo, or something else entirely– will be a buying experience that is almost invisible, so natural that customers don’t even think to compare prices.
Are we getting lazier?
Critics say that Dash Buttons solve a non-existent problem: How hard is it to go to the Amazon App and buy some freaking paper towels? Are you really so lazy that you need a button?
But how hard was it to pick up the phone and call a cab?
Amazon Dash Buttons have been written off as a misguided corporate strategy, a failed product, a gimmick, an April Fools Joke, or as (my favorite) a symptom of Amazon’s slow spreading disease. Amazon Dash Buttons are one way Amazon plans to increase engagement across its Prime ecosystem and give customers less of a reason to shop anywhere else.
In order to raise membership fees Amazon must increase the value of Prime for members by bundling other products with Prime. Prime Music and Prime Photos are other products Amazon hopes will increase value for Prime members. Amazon is also investing in voice recognition– just say the word “toothpaste” in front of your Amazon Echo and poof!