In Depth

How Amazon Does Commerce

Amazon’s 2015 so far is a tale of big announcements, marketplace rollouts and unique takes on commerce in the hyper-connected world that’s transforming into an Internet of Things phenomenon.

Amazon may have to answer to investors about its lack of profits as it continues on its “investment mode,” but it’s hard to argue that Amazon is reinventing commerce at every turn as it gets its hands into retail markets as diverse as travel, hospitality, home services and grocery, not to mention, going direct to consumers with branded commerce buttons it calls Dash.

Here at PYMNTS we like to track Amazon similar to the way it wants customers to track packages with drones — with a close eye to what all of these various opportunities will deliver.

To help guide that journey, we’ve gathered up the Top 10 stories so far this year that provide a closer look into Amazon’s ecosystem for 2015. 

1. Prime Turns Amazon Profitable Again (but temporarily)

Jan. 29 was a big day for earnings in more ways than one: a surge in holiday sales and Prime memberships helped Amazon post a profit — potentially giving analysts and Wall Street one of the biggest shocks at the start of the year.

Shares of Amazon stock surged nearly 12 percent in after-hours trading on the news. Amazon reported profits of $214 million, with overall operating income at $591 million (up $81 million from Q4 in 2013). That’s a stark contrast to Q3’s operating loss of $544 million on $20.58 billion in sales, an accomplishment that many analysts quipped was quite an achievement. Q4 had sales up 15 percent, year-over-year to $29.33 billion. A big part of Amazon’s profit story is CEO Jeff Bezos’ bet on Amazon Prime.

2. Amazon Opens For Business On Alibaba’s Tmall

Amazon pushed its expansion into China through a somewhat unexpected channel as it opened a flagship store in an online market of its Chinese counterpart – Alibaba Group Holding’s online marketplace.

Located in Tmall, Amazon’s new offering is, at least so far, a limited number of product categories including imported food, women’s shoes, toys and kitchen equipment. By signing on with Alibaba, Amazon has essentially become a merchant customer and will be paying Alibaba a commission on each of its transactions. However, with Amazon struggling to gain a foothold in the massive and expanding Chinese market, the transaction commissions could be worth it. Amazon had just a 1.3 percent share of the total business-to-consumer market in China, down from the 13.8 percent it controlled in 2008.

3. Amazon Acquisition Focuses On ‘Internet Of Things’

Amazon acquired 2lemetry, a Denver-based startup focused on software to manage smart networked devices and the Internet of Things (IoT).

2lemetry is a 2011 startup that reportedly raised $9 million, including $4 million in a round two months ago that included Salesforce Ventures. The company’s customers include Honeywell, the Demeter energy group and office recycling service First Mile. 2lemetry’s existing products offer hints of what Amazon may have in mind with the acquisition. One of 2lemetry’s products, 2lemetry Incoming, “enables location and proximity sensing, facial recognition, and geofencing for people, places and things.”

4. Amazon Takes On B2B With Launch Of Marketplace

Amazon has launched a new marketplace that caters to the business community, and it’s got a name that’s easy to remember: Amazon Business.

The section on Amazon.com hit on April 28 and brings the same experience shoppers have on Amazon.com onto a site that’s specifically geared to bring benefits to its business customers. This includes offering products that range from IT and lab equipment, to education and food supplies and more, the company said. Similar to Amazon Prime, Amazon Business customers are eligible for free two-day shipping on millions of items. Users also have the ability to have multi-user business accounts, approval workflow, payment solutions, tax exemptions and dedicated customer support.

5. Amazon’s Webstore Shutting Down

Amazon is telling online-merchant customers that it will shut down its Amazon Webstore service on July 1, 2016.

The Webstore platform, which enables retailers to create and run online shops with a minimal amount of technical complications, was already rumored to be informing merchants that they should make other plans according to multiple news reports, although the Amazon Webstore home page was still offering new customers a 30-day free trial.

6. Amazon’s ‘Dash’ To Connected Commerce

Yes, this was real, and no, it was not an April Fools’ joke. Amazon launched its own version of the Staple’s Easy Button for buying goods on its marketplace on March 31.

The eCommerce giant rolled out Amazon Dash, the small device that offers consumers the chance to buy products they use frequently at the touch of a button — literally. The little device is aimed at connecting consumers to commerce in an entirely new way, while still helping Amazon go after one of its top goals: driving up their Prime membership.

The Dash Button, or buttons, depending on how many products the customer is looking to order, is an actual device with a specific product attached to each one. They come with adhesive to stick on, or near the product, to remind customers to reorder when they get low.

And as MPD CEO Karen Webster wrote the week following the Dash’s release, “Amazon’s launch of Dash might be the best look we’ve had so far into how Amazon thinks about omnichannel.”

7. Amazon’s Twist On Travel

Amazon officially confirmed all of the rumors and speculation that it was going to enter the travel business and did in April.

Amazon Destinations is a hiveoff of Amazon Local, and allows hotels, resorts and bed and breakfasts to advertise there and for users to sort by location. Think of it as a cross between Expedia, Booking.com, Hotels.com, Airbnb and Hotel Tonight with a twist.

The twist, as hyped by Amazon, is that the site automatically posts popular destinations based on where the user lives. With a tagline “Hit the road: Book local getaways,” Amazon is setting itself apart by offering a way to find unique weekend getaways that are close to home, based on data that show that 40 percent of all U.S. domestic leisure trips are short-term getaways of 1-3 nights.

8. Amazon’s Home Service Launches

The eCommerce giant went live in late March with its on-demand services marketplace, Amazon Home Services.

The launch included a much larger number of categories than its previous incarnation — Amazon Local Services — as well as a presence in more cities throughout the U.S. The refurbished marketplace offers a wide range of professional services in and of themselves. This made Amazon Home Services much more of a direct competitor to Craigslist, Groupon and Angie’s List.

9. Amazon’s Drone Delivery Plans Include Smartphone Tracking

An Amazon patent filed with the U.S. Patent Office details how the eCommerce company’s delivery drones may work, which involves a tracking system using smartphone data.

Details of the patent and proposed delivery system were just being released in early May,  following recent approval — although it was filed in September of 2014. Though it is indeed possible that the ultimate “final” delivery drone may differ from the plans filed eight months ago, the initial details disclose that the drones will update their routes in real time. And customers will be able to customize locations for package deliveries – such as home, office, etc.

10. Amazon Echo Listens For Prime Members’ Orders

When Amazon brought its high-tech service Echo to the scene last November, analysts knew its likely purpose: to get people to shop more on Amazon. The tool is viewed as the eCommerce conglomerate’s most high-profile, consumer-oriented foray into the Internet of Things thanks to the device’s ability to interact with a human voice to aid consumers in daily tasks – for example, updating their shopping list or activating a music stream.

The service, however, was not directly connected to the ability to shop online. Until now. Prime consumers who ask Echo to update their shopping lists can actually carry out the shopping, too. Amazon analyzes previous orders registered to an Echo account. If a consumer wants to re-order that item, Echo will advise how much the item costs and place an order.

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