According to a recent Wall Street Journal story, Amazon.com Inc. (AMZN) is in the process of building a Kindle tablet-based point-of-sale (POS) checkout system. This is, in part, fueled by the company’s desire to be exposed to brick-and-mortar retail operations and gain an acute understanding of consumers’ in-store buying behavior. AMZN acquired mobile payments startup GoPago Inc. back in December with an aim to leverage their mobile payment technology for POS applications. Now, by seamlessly integrating GoPago’s credit card reader (like Square) with their Kindle Fire HDX tablets to create a complete transaction-enabling solution, the company aims to make it easy to use for small businesses. Amazon is toying with the idea of giving free Kindles and credit card readers to businesses in order to collect their sales data. If this were to happen, businesses that could not previously afford the switch to mobile POS solutions might find the offer enticing enough to take the plunge. Kindle’s price point will make it particularly attractive to small businesses. Stationary POS solution vendors in North America, including behemoths like NCR and Fujitsu, are at a distinct disadvantage with the lower revenue tier retailer community. Competitive pricing and the more desirable form factor of these mobile alternatives could take business away from these companies’ core stationary product offerings.
Amazon already has a wealth of knowledge pertaining to online shopping trends and instituting its presence in the physical world will help the company further its retailing ambitions. This is especially important given that a significant percentage of consumer spending today continues to happen offline. A potential upside for retail establishments is that Amazon is considering partnering with them to allow promotions and discounts to be offered through the Amazon.com website. Another benefit to an Amazon POS system is the company’s already established customer database. Amazon.com holds credit card information for more than 230 million users, which could potentially help make the checkout process fast, efficient, and convenient. Customers would now have the option of completing their in-store transactions without taking out their wallets. By capturing information on their customers’ offline shopping habits, AMZN will hold an unparalleled advantage over its retail peers – invaluable competitive insight that will help enhance cross-selling and up-selling efforts on their website.
VDC believes this very advantage could also prove to be one of the primary barriers to adoption of the Kindle-based POS system. While this new solution can ease the checkout process and help retailers elevate overall service levels, they will, possibly, be wary of the fact that they are giving valuable customer-related information directly to their competition. With this initiative, AMZN will gather data from a variety of different retail stores and gain a much broader perspective of overall market trends and consumer buying behavior, and will be able to use that data to divert additional shopper traffic to its own website. The recent data breach at Target also begs the question - how secure will this new Amazon solution be. As we stated earlier, Amazon.com has detailed credentials for more than 230 million credit cards in its databases and this new system will, potentially, increase those numbers. This wealth of customer information will only serve to attract the attention of hackers and identity thieves.
Amazon is attempting to break into a field that is currently dominated by Apple. With its many apps and accessories that allow stores to turn iPads and iPhones into mobile POS devices, Apple products are the solution of choice for a large number of retailers, across tier levels. This most recent report only reaffirms AMZN’s sales and marketing strategy over the past several months, declaring itself to be a better, lower priced alternative to AAPL’s iPads – case in point, the Kindle Fire commercials. If AMZN takes a more proactive approach to positioning its tablets as a suitable alternative to existing stationary and mobile POS solutions in the market today, the company can achieve considerable success. For retailers, a competitive market simply means more in-store technology options to choose from. Whether AMZN’s potential entry into the POS market wreaks havoc in the retail industry remains to be seen, but this consumer device adoption trend most definitely is real. We will be sure to keep our readers updated on this developing story.
(With significant contributions from Jake Ferry, Research Assistant.)
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