Amazon.com, Inc. (NASDAQ:AMZN) surely wants to boost its sales in any way possible, even if it has to cannibalize its own offerings. The e-commerce giant just wants to retain its customers and for that it has now plans to ramp up an offering that was once mistaken to be an April Fool’s joke. The Wall Street Journal (WSJ) reports that the Internet giant plans to announce dozens of new brands to its Dash buttons feature.
Amazon launched its press-to-buy Dash button in spring last year as an initiative to take away customers from traditional brick and mortar stores. Dash buttons are thumb-drive-sized devices that let shoppers to order multiple things such as tide detergent and Cottonelle toilet paper simply by pressing the button. Customers were encouraged to put their wireless devices by their refrigerators or washing machines so that they can quickly reorder things if they are running out. Despite being considered as a joke, the company is still determined to its offering and now after about 14 months, it is on the move to expand its range from over 100 current brands to even further.
Apart from the normal sales commission, which ranges from 8% to 15%, these consumer-product makers pay Amazon $15 for every Dash button sold, and 15% of each sale made through the button. Consumers on the other hand purchase these buttons for $5 each. Amazon further attracts customers by offering $5 rebate, which can be utilized on the first sales order. An important thing to note here is that these Dash buttons are only offered to Amazon Prime users who pay $99 per year for extra benefits such as free two-day shipping and access to bunch of exclusive content. As a result, these members spend a lot more compared to non-Prime users.
Amazon charge a hefty $200,000 buy-in fee from the companies, but according to people familiar with the matter, it dropped that fee for the early birds to promote its offering. Those early brands include Kimberly-Clark Corp., Procter and Gamble Co., and PepsiCo Inc.
While Amazon is doubling down its efforts on the relatively new offer, an important question here is whether consumers actually want this or not. According to market research firm Slice Intelligence, less than 50% of the consumers who bought Dash button since March 2015 have used it to place an actual order. For those who buy through Dash buttons were found to make purchases about once in every two months. This leaves a very big question on the efforts the company is making.
Several companies that have partnered with Amazon for its Dash button have however said their main purpose was not to boost sales. Instead, they have signed up with the tech giant just to have strong bond for future. They added that the Dash is more beneficial as a marketing tool instead of product-delivery system. Ken McFarland, director of Amazon client Seventh Generation Inc. said about Dash buttons: “It may not be the most intuitive feature, but Amazon is trying so many things and you don’t want to miss out on the ones that work. You want to be out there if it does happen to be a hit.”
An important thing to note is that Amazon is also cannibalizing its own products through its Dash buttons. Its smart virtual assistant offerings including Amazon Echo and Amazon Alexa allows customers to order multiple things just by their voice commands. Hence, the two offerings are supplementary to each other and promoting one is going to kill sales of the other.
Amazon is also not the only company that is offering these push buttons. The Sunnyvale, Calif., company Kwik Commerce Ltd., is also launching its own buttons. The firm said to have has raised $3 million this month to expand its offerings, which includes buttons for Huggies diapers and Anheuser’s beverages.
While some consumers have liked the Dash buttons and said that they have exceeded expectations, others have shown their dissatisfaction. A math teacher Kyle Boyd, who is one of the early Dash customers, complained that the buttons don’t display price. Amazon updates its prices online and if consumers are unaware of the price change, it can have a big disappointing impact. Though Amazon provides text messages alerts upon request, but checking prices every time is not time saving and that goes against the core purpose of the Dash buttons.
All of this shows that Amazon efforts may just go in vain. Hence, in order to make its efforts fruitful, the e-commerce giant needs to make sure that its offering is successful among consumers. One of the steps it can take is to adjust the categories it offers. For instance, diapers are not a good fit for Dash as they are generally bought at regular intervals. Hence, the company can replace that with a food category, for example, Pizzas, which has a spontaneous demand. With such efforts, we hope that the tech giant is able to achieve a broader strategy of boosting sales by giving less reasons to customers for going to a rival brick and mortar store.
Amazon stock was down over 3% on Friday, which was likely due to Brexit impact as Amazon may now have difficulties in expanding in UK.
