No More Dashing Out To The Store
Away with the refrigerator magnet shopping list. Shop as you go with the Amazon Dash Button.
In the Spring of 2015, Amazon launched a new product called the Amazon Dash Button, which is a palm sized wireless internet (wifi) connected device that with a push of a button automatically places an order for a household essential product. Amazon partnered with large consumer goods brands to launch this product. Each Dash device is for one specific brand, and the consumer is able to pre-set specific order preferences on the Amazon mobile App. The consumer can then stick the device in a kitchen cabinet or place in the home adjacent to its product so that as the consumer uses and depletes a basic essential like laundry detergent, paper towels, or pet food, they can reorder with a simple and easy push of a button. Additionally, to make it practical for people who live together, no matter how many times the button is pushed it won’t place an additional order until one order arrives at the house.
The idea behind Dash is to seamlessly integrate product use with shopping, thereby eliminating the need for an old fashioned grocery list or for the consumer to set aside time to plan and shop either online or in a local grocery store. The Dash product design makes Amazon sticky for its consumers, because by making it easy and fast to shop with Amazon consumers are likely to do so and Amazon is less likely to lose business to local grocery stores when consumers forget to reorder on the Amazon web site.
Today there are 229 dash buttons for beauty products, groceries, health and personal care, household supplies, kids and baby, and pet supplies. Amazon’s traditional retail business model is to provide a wide variety of products to consumers at low prices, with no tax and fast and free shipping, in an easy and convenient online shopping experience. The traditional operating model for delivering this value to customers is a user friendly web site and high level of reliability and speed achieved through its efficient warehouse, supply chain, and order fulfillment operations. Amazon is using this particular digital technology to drive increased demand, earn additional market share, and in the long-term to lead the way in household interconnected devices and to gain additional data about consumer habits [1]. This data will be valuable to Amazon as it develops future products and product offerings. For instance, Amazon might be able to predict with a high degree of reliability the frequency of orders based on household size and zip code, and could offer to send products as corresponding intervals. So if they find that 25-year-old men tend to order shampoo and soap every five weeks, then Amazon could automate that decision for similar consumers.
The main concern with the Amazon Dash Button business model, and online retail more broadly, is environmental sustainability. Until recently consumers had to travel to a central location, the local grocery store, to purchase household essentials. Today, for the sake of convenience and cost savings, consumers are increasingly ordering online which means that there are lots more delivery trucks out on the road and lots more packing supplies like cardboard boxes being consumed than in the traditional shopping model. The challenge for Amazon and for local governments in the long-term is to make shopping more environmentally friendly. To compete with Amazon, local governments may have to reconsider sales tax on basic essentials because it is driving consumers online and away from brick and mortar businesses.
Amazon is also working on a Dash Replenishment Service, which will integrate product ordering directly into household electronics and appliances such as refrigerators and washing machines [2]. This reinforces Amazon’s bet on how connected digital technology will drive the consumer shopping experience in the future. These devices when paired with Amazon’s data will be able to keep a household stocked with milk, laundry detergent, and a variety of other products. So, the Dash Button is simply Amazon’s first step in that direction.
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[1] Michael E. Porter and James E. Heppelmann, “How Smart, Connected Products Are Transforming Competition”, November 2014, [https://hbr.org/2014/11/how-smart-connected-products-are-transforming-competition], accessed November 2016.
[2] Mike Isaac, “Amazon Dash Aims to Be a Push-Button Substitute for the Supply Run, March 31, 2015, [http://bits.blogs.nytimes.com/2015/03/31/amazon-dash-aims-to-be-a-push-button-substitute-for-the-supply-run/], accessed November 2016.
[3] Featured Image from the Amazon Dash Button Web Site, [https://www.amazon.com/s/ref=sr_hi_3?rh=n%3A133140011%2Cn%3A%21133141011%2Cn%3A2102313011%2Cn%3A10667898011&bbn=10667898011&ie=UTF8&qid=1479506852], accessed November 2016.
This post touched on a very interesting implication of the dash buttons: not only will the dash buttons help Amazon secure repeat purchases on a wide variety of household items by making it ultra-convenient for customers to re-order a product by simply pushing the button, the data Amazon obtains will help them infer purchase behavior of entire customer segments. In addition to that, I think that Amazon could also rely on the dash buttons to further improve its already stellar supply chain management. If customers settle in on using dash buttons consistently, then customer demand for products from Amazon will become more steady, and Amazon would likely be able to save money in working capital (from being able to carry less inventory), and they might even be able to negotiate better terms with their suppliers if they’re able to promise more consistent orders on items from their suppliers. Given the large benefits this could provide to Amazon, I think they should do more to incentivize their customers to use dash buttons for as many products as possible.
I had heard of Dash but but wasn’t aware of exactly how it worked – super interesting. I wonder how the adoption has been so far and whether there’s any data around how well it’s doing relative to projections. If you look into the way payments work (http://www.popsci.com/youve-been-looking-at-amazon-dash-all-wrong), while a button is about $5, the amount is applied to a credit against the items purchased, so it’s essentially free – the sticking point is thus that Dash buttons seem to enhance “stickiness” through Amazon. Per this article I don’t think this connects to mobile devices, which it probably should so that households can better manage their Dash buttons. Lastly, how are consumers able to switch brands? For example, if I wanted to use a different detergent, what’s the process? I’m not sure how easy it is if this doesn’t integrate with mobile – do you need to purchase a new button? I think the fact that these types of products lend itself to less brand loyalty (I’m not loyal to my detergent, but rather look for the best price), this might be an obstacle that Dash needs to overcome. Lastly, I wonder how basic grocery stores will respond to this as well, and if they’ve seen any ramifications thus far.
Even if dash buttons do not become a staple of American households, launching dash buttons was an excellent marketing campaign for Amazon. Amazon gained free earned media from hundreds of reputable news sources after the product launch. Furthermore, this sparked conversations which normalize online shopping and show how it can be integrated into a family’s offline life.
For CPGs, Amazon dash buttons give companies direct access to individual consumers. The dash button makes the brand highly visible in the pantry and encourages repeat purchases. Furthermore, it offers CPG valuable data on the consumption and purchasing patterns of its goods. This data could inform package sizes and targeted marketing campaigns by customer segment.
Although I have never used a dash device myself, I think the concept is extremely attractive. I understand where your concerns come from with regards to taking business away from brick and mortar stores and the environmental concerns by having more delivery trucks on the roads. However, I would argue that this trend towards more consumers shopping online is happening anyways, and dash isn’t changing this in meaningful ways, but what this means is that amazon needs to place even more emphasis on making their delivery network more sustainable.
One other concern I would have as a consumer is around price fluctuations. As an Amazon customer, I’ve noticed that prices do fluctuate quite a bit. If the price changes on an item that is reordered, is the item still automatically reordered, or is there a mechanism in place to alert the consumer?
I agree with JAH that in many ways, this turned out to be more of a marketing move than anything. Do we know anything about how successful this has been? To me, it seems like the main value Amazon might get from this is actually enhanced consumer data it can sell back to the brands (or keep for itself). In my mind, this only marginally enhances the buying experience for the consumer – Amazon already has one-click ordering so this really does not change my buying habits all that much.
Great post, I have been always intrigued by the Dash Buttons even though I have never used them. I am curious of how the initiative is performing, who is the target customer and what is the penetration. It looks like a great initiative for the reasons you mentioned but most the product associated with Dash Buttons are almost-commodities, therefore more savvy customers might not want to commit in the hope of future promotions on other brands. Also, is the price locked? and how does Amazon communicate price change?
Finally, interesting consideration on the increase amount of trucks on the road to move goods. I think it could be a subject to a different study. My counterargument is that instead of 100 cars going to the supermarket you can have 1 truck doing delivery to 100 houses in the same ZIP code area therefore reducing traffic. The process could be even further improved with self-driving vehicles or drones.
Super interesting. I had never heard of Amazon Dash Buttons prior to reading this, but a couple of concerns crossed my mind as I read over the post. First, this cannot be a cost-effective or sustainable way to ship customers their essentials. Is every push of a button a new order? Will I received a different package for each item? As Amazon, I would want to consolidate orders to minimize shipping costs. As a consumer, I want to receive minimal shipments for convenience. Second, these buttons are not aesthetically pleasing. I would want to be able to order the buttons in solid colors or finishes. Also, perhaps they can create different button panel sizes for various quantities of buttons that can be programmed, so that you don’t have to have a dozen or more buttons attached to your wall, fridge, or cabinet. Lastly, the setup time of these little buttons seems daunting. It could actually be fairly simple, but it just seems like it would be complicated. I would much rather create a shopping list with Amazon’s Echo than have to set up a bunch of buttons around my house.
The article and comments identified are fascinating. The Dash Button, when first introduced, was revolutionary and had consumers concerned that Amazon buttons were going to be speckled all over your house, like tacky stickers next to your washing machine. Though this has not happened yet, as MB mentioned, the Button can serve as the first step towards integrating product consumption and re-purchases. Many concerns have been highlighted above, notably the availability of sales and substitute products, and I have no doubt that Amazon will continue to refine the access that these Buttons provide. Rather than a Button, I wonder whether the future might be in the smart refrigerator space as was mentioned above, where SKUs and decreasing product weight signal a request for repurchase. This same principle could be applied to laundry detergent on a small Amazon scale – more aesthetically pleasing than an Amazon Button – where under a certain weight, an alert can be triggered for repurchase on the app. The idea that purchasing products through Amazon, independent of an app or computer, is certainly gaining momentum though.
Very interesting post, I also find the dash button concept very clever. But I remember reading a WSJ article that mentions that users are not using the dash buttons. Among the causes for this issue is the fact that the buttons do not display product prices. Is it possible for Amazon to include a price display in the buttons?
http://www.wsj.com/articles/amazon-to-add-dozens-of-brands-to-dash-buttons-but-do-shoppers-want-them-1466970276
Awesome post! thanks for laying out the Amazon dash. Questions that come to mind are 1) who would be the earliest adopters? 2) how does this fit into amazon’s longterm plan? 3) are there any major unforeseen risk in implementing such a frictionless technology commerce button?
At least for the UK, Dash was predominantly launched to raise awareness that Amazon had ventured into groceries and consumables. Historically a books and media business, Amazon has struggled with adapting its systems and processes to other types of products – think softlines (apparel) and of course, consumables! It was a huge marketing plug for the company and was generally met with mediocre customer experiences (see http://business.newsfactor.com/story.xhtml?story_id=020001BZTH3O)! The data collection point is not as strong, as Amazon already sits on a mountain of data that allows it to gauge how long you will need a replacement, dash button or not!
I echo a lot of the sentiments that other comments have raised about the financial viability is, but I would say that Amazon is invested in growing the industry and that it’s willing to take the short term hit. For example, Prime Now also loses money! In fact, I’d argue that it hasn’t gone far enough – for example, while it does have dash, the prices of consumable products on Amazon was often more expensive than the UK grocers (Tesco, Sainsbury) and required the customer to buy in bulk! Initiatives such as Subscribe and Save have also not been very successful because the savings for a subscription model often doesn’t give the consumer incentive to do so (except for in Baby related categories).
Interesting post! I see this as a brilliant marketing move by Amazon. Also, by having first-mover advantage, they can acquire early adopters to build a user base to test and improve the product offering. With that being said, what can Amazon do to improve the dash button product? The first thing which comes to mind is prices. Many people, including myself, who purchase basic household goods online, do so because of the ability to shop prices to get the best value. When using the button, how do we know we are getting the absolute lowest price for the product? Second, what can Amazon do to help customers understand when the product is in-stock vs. out of stock. I can think of a scenario in which a family member orders a product (like detergent) only to find out a few days later that it hasn’t been delivered because Amazon is out of stock. Lastly, what prevents the manufacturer of the product (e.g. Tide) from making its own button? How does Amazon use digital technology in this case to prevent that from happening?
Interesting post! Before reading your post, from the little I knew, I didn’t think dash buttons would catch on with consumers. I’m still not totally swayed—though, I do believe that there is more upside than downside for Amazon pursuing a product like this. I’m curious about Amazon’s plans about how this product will permeate the market. My first thought is that only very loyal customers would be moved to purchase a dash button—if so, what does that mean for the number of dash buttons Amazon would like to see in every house. In any case, after reading this post I’m starting to become more aware about the different ways my personal data is gathered. More and more, especially with comparatively little resources devoted to the protection of personal data—I feel like consumers will need to decide for themselves whether they want to trade convenience for privacy.