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Amazon’s mobile POS success hinges on customer data

February 3, 2014

The Kindle Fire

The ecommerce giant’s reported entry into the mobile point-of-sale space could help retailers tie important online shopping behavior to in-store sales, if they can get over the fact that they are working with Amazon.

Last week it was reported that Amazon is looking to roll out a mobile POS offering for retailers and merchants that leverages a Kindle device. While the competition to own the in-store competition continues to grow, a string of online data and a strong consumer following could give Amazon an edge in this space.

“From a pure POS perspective, Amazon probably won’t bring much to the table that is specifically different other than they could be a very low cost provider,” said Rick Oglesby, senior analyst at Aite Group, Boston.

“However, Amazon brings a lot to the table in terms of it’s online presence and consumer following, and it could therefore be a big demand generation solution for merchants,” he said.

“The launch of a POS system would be more about helping small ‘sellers’ sell in-person in a similar way to how Amazon helps sellers sell their goods online. So they are likely to offer a competitive POS system that is differentiated by marketing capabilities rather than by POS capabilities.”

Leveraging Kindle

Amazon’s reported mobile point-of-sale system will let equip merchants with a Kindle device that includes a credit card reader.

The Internet giant’s strategy in entering this space will also likely leverage the significant amount of data on shoppers’ behaviors that the company has accumulated online and translate it to a physical brick-and-mortar store, where the majority of retail sales are still made.

For example, Amazon could potentially differentiate its offerings with Web or analytic tools for retailers that give better insight into how mobile POS is working.

Additionally, focusing on the Kindle could give Amazon a boost in sales of the devices.

According to new research from IDC, the tablet market is slowing down a bit, driven by a dip in Kindle sales.

Kindle Fire shipments during the fourth-quarter of 2013 hit 5.8 million, representing 7.6 percent of the total tablet market. This is a slight dip from 5.9 million shipped during the fourth-quarter of 2012.

The Kindle Fire

Amazon’s wrath on retailers
As retailers and merchants look to build out better in-store and mobile capabilities, Amazon’s rumored point-of-sale service could complicate the space with another option that marketers need to choose from.

The online giant has also not proven that it can move its online focus into the day-to-day operations of bricks-and-mortar stores.

Additionally, retailers have a long history of not wanting to work with Amazon, which is largely responsible for making showrooming a mainstream activity.

To compare, both Google and eBay are courting brands to work with them for their mobile payment and in-store initiatives.

The Amazon news also coincides with new reports that Apple could be close to rolling out its own mobile payment system with technology that builds on its Low Energy Bluetooth iBeacon technology that was rolled out last year in the iOS 7 operating system.

However, brands are still warming up to mobile POS and marketers’ lack of trust in mobile payments could be greater than the benefits of streamlining the point-of-sales for some.

Take Google Wallet, for example.

When Google Wallet launched, retailers were afraid that the data collected in-store would be used against them online, according to Denée Carrington, senior analyst at Forrester Research, Cambridge, MA.

“Amazon’s biggest hurdle will be merchant trust,” Ms. Carrington said.

“With the launch of login and pay With last fall, many retailers expressed wariness in relying on Amazon both for login and payment credentials,” she said.

Mobile earnings
At the same time that Amazon is reportedly readying a bigger in-store push, the company reported its fourth-quarter and full 2013 earnings on Thursday.

Amazon’s $25.6 billion revenue during the fourth-quarter is a 20 percent year-over-year increase. Additionally, fourth-quarter net income reached $239 million, translating to 51 cents per share.

However, Amazon missed its $26 billion in expected quarter revenue with a 66 cent per share earning from analysts.

Amazon’s revenue hit $74.5 billion for all of 2013, increasing 22 percent over 2012.

Similar to other mobile point-of-sale systems such as Square, Amazon would likely attract smaller merchants initially since large retailers have higher labor and investment costs with the technology and have therefore been slower to adapt.

However, this could work to Amazon’s benefit if the company is able to prove that the model from taking online assets and applying them to a brick-and-mortar environment works.

“Amazon is perceived as a big threat by larger retailers, but smaller retailers/sellers are some of Amazon’s best customers and biggest proponents,” Aite Group’s Mr. Oglesby said. “If they focus on the smaller end of the market, they will do well.”

Final Take
Lauren Johnson is associate reporter on Mobile Commerce Daily, New York 

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