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Amazon eyes NFC as next front in mobile commerce format warBy
With Amazon.com Inc. already a major player in mobile commerce via its mobile Web site and applications, the company is now rumored to be setting its sights on the increasingly competitive near field communication arena.
With rumors swirling that the Amazon Payments division is testing an NFC platform, the obvious question is how would the online retail giant compete against the likes of Visa, MasterCard and Citi, Google and Microsoft, Research In Motion and Samsung, as well as Isis, the joint venture of Verizon Wireless, AT&T, T-Mobile, Discover Card and Barclaycard, all of which have announced NFC initiatives of some sort.
“Without knowing the details of the services, it is hard to say [what the implications would be]—it really depends on what Amazon is envisioning,” said John Devlin, Bedford, England-based senior practice director at ABI Research. “Amazon is obviously an Internet-based retailer, so is it setting itself up as someone who accepts and processes payments, or can enable see, scan, tap and wave for goods that will be delivered to them via Amazon.
“NFC is a highly attractive market, but the way it is developing with an array of offerings from a variety of very strong players, I’m worried that it could cause fragmentation in the U.S. market,” he said. “I’m also not sure if all of these services will be fully interoperable, or if there is a clear value proposition for consumers.
“Will consumers understand how to use these services, or will it cause confusion? Will consumers hold back to see which one will be the winning technology platform? Do they want to manage five or six NFC applications on their smartphone, or is it a simpler proposition than that?”
Amazon declined comment on the story.
Ambitious mobile plans
It is clear that Amazon is making mobile a top priority beyond its Kindle devices, applications and ebooks.
Amazon’s debut of the Appstore for Android and Cloud Drive were the first major plays in the online retail giant’s game plan to become the biggest merchant of mobile content in the world (see story).
While all sights have been locked in on Apple and Google to see how high the bar will be raised, Amazon has built what is arguably the best combination of products to be a force in the mobile marketplace (see story).
Amazon’s one-click mobile shopping experience has made it a mobile commerce giant, and its Price Check by Amazon application for Apple’s iPhone has been a major disruptor for bricks-and-mortar retailers.
Much like ShopSavvy and eBay’s RedLaser application, users of the Price Check by Amazon app can scan a bar code of a particular product in store to see if they can get a better price via Amazon.
Apparently, Amazon is exploring NFC as the next great frontier of mobile payments and retail, with the opportunity to get in the game with loyalty, customer relationship management, couponing and marketing plays via contactless technology.
The carriers should take note—Isis has increasing competition in advance of its early-2012 launch.
If Google, MasterCard and Citi do indeed team up to launch an NFC platform it will be a force to be reckoned with (see story).
RIM and Samsung have both expressed their interest in NFC, with the latter having launched the Android-based NFC-enabled Nexus S smartphone and which is partnering with Visa for an NFC handset for the upcoming Olympics in London.
Imagine if Amazon teamed up with Visa along with one or more handset manufacturers? What about Microsoft, said to have its own plans related to NFC?
What if Amazon launched its own NFC-enabled smartphone or tablet? It is not so far out of the realm of possibility.
Whatever its plans, some analysts believe that Amazon may actually beat other competing players to the punch.
“It is not logical that Amazon will wait for NFC to be deployed before it launches a mobile commerce solution, because Amazon is one of the few companies that may not have to wait,” said David Schropfer, author of The Smartphone Wallet, Red Bank, NJ.
“Here is why: NFC essentially connects two computers together—in this case, a customer’s smartphone and a retailer’s POS device—allowing each computer to ask questions, and allowing the other to answer,” he said. “The Internet does exactly the same thing, and Amazon has been using it to connect a customer’s laptop/PC to a retailer’s POS/servers for years.
“Given that the mobile Web connects most smartphones to the Internet, and practically every POS device at every bricks-and-mortar retailer in the United States has an IP address, Amazon.com is likely to use its existing infrastructure to allow customers to have a similar shopping experience at a bricks-and-mortar retailer that the customer experiences online at Amazon.com today, except with all of the fields filled out in advance—with the consumer’s permission, of course.”
In addition, Amazon has another significant factor in its favor—competence in managing its infrastructure.
On its busiest day, Amazon.com processes about 8 million transactions. Compare that to the entire American Express network in the U.S., which processes an average of about 10 million per day, per Mr. Schropfer.
“Essentially, it seems reasonable that Amazon.com would use the back door into each POS system, which would hypothetically require only programming and partnerships, which would take months, not the years it will take for mass adoption of NFC,” Mr. Schropfer said.
“It seems the [mobile payment format] war will have more than one dimension, and every major player in telecom, Internet sales, POS manufacturing and payment processing wants a stake in this emerging system,” he said.
Mobile commerce vs. mobile payments
A key to understanding what Amazon is up to hinges on an awareness of the difference between “mobile commerce” and “mobile payments,” according to Unbound Commerce.
NFC has been largely talked about in the context of the latter and the recent collaboration by carriers for Isis shows just how tough this is to pull off.
In Europe and Japan, Nokia and NTT DoCoMo have been pushing the mobile wallet for a decade with limited success.
Even if U.S. consumers were to embrace mobile payments versus credit-card-based platforms, consistent installed equipment at retailers’ point of sale is a big hurdle to get over, per Unbound Commerce.
“Retailers already work with credit-card companies, and established and trusted platforms like PayPal are in a much better position to win the mobile payment race,” said Wilson Kerr, director Of business development and sales at Unbound Commerce Inc., Boston. “My sense is that this is not what Amazon is really after, since no sane retailer would tolerate an Amazon NFC ‘tap it’ hotlink to their mobile commerce site, when they could capture the sale themselves.
“I do not imagine retailers are too fond of Amazon,” he said. “My suspicion is that Amazon is really after ‘real-world trigger points’ for mobile commerce, not mobile payments.”
By using NFC to launch links to a mobile-optimized page, where a product is queued up for online purchase, Amazon could bridge the gap between the real and online worlds, and mobile is a perfect format for that.
“This is where NFC shines, since mass-transit ticketing and keyless car entry have paved the way for consumer adoption,” Mr. Kerr said. “I would watch for out-of-home advertising with NFC from Amazon and possibly even Amazon pop-up ‘showrooms,’ where items can be handled and viewed, but bought online and shipped via mobile commerce launched by NFC.
“Retailers should be aware of this, and those without an integrated mobile commerce solution linked to their ecommerce platform should get moving,” he said.
Sandy Shen, Shanghai, China-based senior analyst at Gartner, said she thinks Amazon has not decided whether to enter NFC payment or not. She sees the more immediate opportunity as being with proximity marketing and loyalty programs.
“Amazon already has a number of technologies to bridge the offline shopping experience with their online store, for example, bar code scanning, picture recognition and product search, so the inclusion of NFC will be another opportunity they can offer the shoppers to quickly search for product information and to drive traffic to their online store,” Ms. Shen said.
“NFC payment will be a long shot unless they really have the ambition to run the payment business,” she said.
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Tags: ABI Research, Amazon, Amazon Payments, Amazon.com, David Schropfer, John Devlin, mobile, mobile commerce, mobile CRM, mobile loyalty, mobile marketing, mobile payments, mobile wallet, near field communication, NFC, The Smartphone Wallet, Unbound Commerce, Wilson KerrYou can leave a response, or trackback from your own site.