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Taken as a short-term strategy, Amazon’s Local Register announcement last month could be considered yet another player being added to an already (over)crowded market led by the likes of Square and PayPal. Each mobile payment acceptance device has its pluses and minuses, and Local Register will be no different – ubiquity of hardware support, supply chain, integration with third-party business solutions, etc.
That said, unlike other players, Amazon is in a unique position to not only deliver a successful mobile payment solution but to change the game for brick-and-mortar retailers and their customers. While much of the discussion around the announcement focused on Amazon’s entrance into mobile payments, it’s much bigger than that – and should be applauded as a strategic move for the dominant (at least for now) online commerce company.
A solid base of customers
While Amazon will likely convince a subset of current Square users to defect with its undercut pricing, most of its business will come from existing Amazon customers, SMBs, and casual merchants who see this as a frictionless opportunity to join the revolution and begin accepting credit cards or upgrade their current payment solution.
For many of the entrants into this space, the reality is they launch without a solid user base. In Amazon’s case, however, the company already has a solid foundation of loyal users on which to build, which puts it ahead of the curve.
A strong infrastructure
Let’s look at what else Amazon has: an existing powerful and secure underlying infrastructure, Amazon Web Services (AWS), and the opportunity for integration with existing Amazon payment services. This is the ecosystem for e- and m-commerce within which most of the popular services now run, including services that require high levels of security and Amazon.com itself.
Amazon’s infrastructure can out-scale and outperform those of its competitors and can more readily leverage the power of Amazon’s massive consumer base to drive interchange and other fees down to their minimum. This is something Square has used to blaze a trail; but based on recent struggles, Amazon has a much better opportunity to take the lead now.
In addition, being the best-in-breed cloud infrastructure provides a unique opportunity for Amazon to scope out the apps, technology, and tools that would fit into its immediate, short- and long-term business goals.
A unique ability to impact in-store experience
Typically, when talking about the in-store experience, Amazon only comes up when discussing showrooming (using your mobile device to price-compare, research competitors, etc.). And, from many retailers’ perspective, the conversation has been clouded by fear. But after last week’s Local Register announcement, we may just start to see a shift in that perspective.
Let’s face it. Most retailers are unable to compete with the big-box stores. Inventory management can be cripplingly expensive. Overhead costs can keep a company from expanding. Now think of that same smaller retailer with the support of Amazon. Inventory would no longer be an issue with Amazon’s “endless aisle;” retailers could offer products continuously – and they wouldn’t have to keep them on the shelf.
On the other side of the equation, Amazon needs these retailers to deliver something it hasn’t been able to before: touch and feel. Partnerships with smaller, local retailers allow Amazon to move in-store. And, with Amazon’s successful delivery service and infrastructure, these local retailers could get products into the hands of their loyal customers by the next day (and in some cases, even the same day).
Local Register gives Amazon the opportunity to start building partnerships with smaller retailers and sets them up to own the full purchasing lifecycle. Consider this example: A consumer orders a product through his/her Fire Phone or Local Register, establishing a payment connection. Amazon fulfills the payment piece for the local shop and then delivers the product to the consumer’s door. This fundamental shift in local retailing gives local store owners access to new and – at least to-date – un-tapped opportunities to eliminate prohibitive overhead costs.
A focus on the long term
As products like Local Register and the Fire Phone (with Firefly) continue to mature, Amazon can begin to reshape the in-store shopping experience in the same way it did the e-commerce experience a decade ago. Soon, brick-and-mortar stores will be able to reduce their inventory and become showrooming experiences that rely on the supply-chain magic of Amazon.com for in-house delivery, reducing footprint and operating costs significantly.
Robert McCarthy is tech advisor at Mobiquity.
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