dash buttons: sprinting to success - deborah weinswig · water pitchers, dishwashers, robotic...

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DEBORAHWEINSWIG,MANAGINGDIRECTOR,FUNGGLOBALRETAIL&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.

D E B O R A H W E I N S W I G

M a n a g i n g D i r e c t o r , F u n g G l o b a l R e t a i l & T e c h n o l o g y d e b o r a h w e i n s w i g @ f u n g 1 9 3 7 . c o m

U S : 6 4 6 . 8 3 9 . 7 0 1 7 H K : 8 5 2 . 6 1 1 9 . 1 7 7 9

C N : 8 6 . 1 8 6 . 1 4 2 0 . 3 0 1 6

1) Initially derided as an April Fool’s joke, Amazon’s Dashbuttons have caught on with consumers who are placingordersatarunrateofmorethanamillionperyear.

2) Amazonhasdramaticallyexpandedthenumberofbuttonsavailablefromthe initial10tothecurrent150.Consumerscan purchase household products, health and beautyproducts, snacks, pet food—even macaroni and cheese—withthepushofaDashbutton.

3) ThebuttonsserveexclusivelyAmazonPrimemembers;theygivemembersmorevalueandenticenon-memberstosignup.

4) ThedevicesprovidesignificantbenefitstoAmazonincludingendearing and locking customers into Amazon’sinfrastructure, likely beneficial wholesale prices and helpwithlogistics.Also,onlyAmazonreceivesthedatacollectedfromDashpurchases.

5) DashbuttonsarejustoneapplianceconnectedtoAmazon’sDash Replenishment System, which also providesconsumables for connected washing machines, vacuumcleaners,petfeedersandmanyotherappliances.

DASH BUTTONS: Sprinting to

Success

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EXECUTIVESUMMARYInitially considered an April Fool’s joke due to its simplistic nature andpundits’ miscalculation of human laziness, Amazon’s Dash button hassurpassedallexpectations.Estimatesarehalfamillionofthedeviceshaveshipped.Moreover,theDashorderraterecentlydoubledtomorethantwobutton presses perminute, or a run rate ofmore than amillion orders ayear.

The initialbuttonsofferedeveryday itemssuchasdetergent,diapers,andrazorblades.Butnow,Amazonhasexplodeditscatalogtoencompass150buttonsforsuchunusualitemsasNerfdarts,guitarstrings,soup,macaroniandcheeseandpettreats.

Although the buttons cater to our inner laziness and desire to notwastetimeshoppingformundane,everydayconsumables,thereismoretoDashbuttons than meets the eye. First, they are only for Amazon Primesubscribers; it is an exclusive service just for them. This is also anenticement for non-members to sign up. And, the buttons are only onecomponentinAmazon’sDashReplenishmentService,whichaccommodatesa largenumberof other connecteddevices thatuse consumables such aswaterpitchers,dishwashers,roboticvacuumsandgarbagecans.Finally,thedigital nature and connection with Amazon’s databases and fulfilmentnetwork provides awealth of data for Amazon to analyze and determineoptimal product assortment, pricing and shipping methods. TheseoptimizationsarealllikelyfavorabletoAmazonanditsmargins.

It turns out Dash buttons are no joke. Rather, they are a simple, elegantInternetofThings(IoT)appliancethatenablesbusyconsumerstoavoidthetedium of standing in line at a store or even having to pick up theirsmartphonestoreordereverydayconsumables.Theyarealsoaninnovativedemonstration of the benefits the Internet of Things can bring to oureverydaylives.

Source:Amazon.com

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WHYDASHISIMPORTANT

FungGlobalRetail&Technologyconsiders theDashsignificant for severalkeyreasons:

1. Thebuttonsarebasicallyfreetoconsumers.2. Thedeviceoffersconveniencefortheconsumer.3. ThedevicefurthercementsthebondbetweenAmazonanditscustomers.4. ThedevicecanprovidesuperiormarginsforAmazon.5. DashisatechnologyplatformthatleveragestheInternetofThings.6. ThedevicerepresentsanotherbenefitexclusivetoPrimemembers.7. ItpromotesDashReplenishmentService.8. ThetechnologyprovidesasourceofdatatoAmazon.

“Free”ButtonsAmazon’sDashbuttonsarepricedat$4.99,essentiallyatzerogrossmargin,andtheycomewitha$4.99creditawardedafterthefirstuse.Thismakesthebuttonfreetoconsumers.

ConsumerConvenienceWiththeDashbutton,theconsumernolongerhastopickuphisorhersmartphoneorlogontoAmazon’sinternetsitetoplacearoutineorderforaconsumableitem.Moreover,thecustomercanlogicallyplacethedetergentDashbuttononthewashingmachinesoheorshedoesnotforgettoreorderdetergent,andAmazoncanmorequicklyreceivetheorder.

CustomerRelationshipsAmazon’sDashisyetanotherservicethatisdesignedtoendearandentrenchitselfwithitsPrimecustomers.ThisofferingrepresentsavirtualcircleforAmazon:themoreservicesitoffersPrimecustomers,themorelikelytheyaretorenewtheirmembership,whichmakesitmoreconvenienttoorderfromAmazon.

MarginBoostPrimememberslikelyseekto,“gettheirmoney’sworth,”fromtheirmembershipfees,andarelesslikelytocomparepricesandspendthetimeandtroubleofshoppingelsewherejusttoachievesmallsavings.ThisenhancesAmazon’smargins.Althoughthereisnotnecessarilyacausalrelationship,Figure1showsAmazon’soperatingmarginsimprovedasthenumberofPrimemembersincreased.

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Figure1.AmazonMarginsvs.NumberofPrimeMembers

Source:Companyreports/ConsumerIntelligenceResearchPartners

TechnologyPlatformWhilethedominantapplicationforthebuttontodayisthereplenishmentofhouseholdconsumables,Amazon’sDashisalow-costdeviceforconnectingtotheInternetofThings.Itcontainsallthecomponentsofaportable/wearableIoTdevice:aprocessor,wirelesscommunications,anoutputdevice(LED)andasensor,theswitch.Thebuttoncouldbeexpandedtoincorporateothersensorsandoutputdevices.Amazonsellsagenericdashbuttontodevelopersforconnectiontovariouswebservices(includingAWSIoT1,AWSLambda2,AmazonDynamoDB3,AmazonSNS4)for$19.99.

Hackers have also reprogrammed the Dash button to perform additionaltasks, suchasorderpizza,beer,Uber cars, keepgrocery lists, trackhabitsand music practice, act as a silent doorbell and control householdelectronicsdevices,amongmanyothers.

AnExclusive,Prime-OnlyBenefitAlthoughitseemsanyAmazoncustomercouldbenefitfromthedevice,DashbuttonsareavailableexclusivelytoPrimemembers,likelybecausetheyalsoqualifyforfree,two-dayshipping.Prime-onlyservicesinclude,freetwo-dayshipping,media,suchasvideoandmusic,offerings,andAmazonPrimeNowone-ortwo-hourshipping.

DashReplenishmentServiceDashReplenishmentService(DRS)isAmazon’sinfrastructurebehinditsDashbuttonsandotherconnecteddevicesthataccessAmazon’sretail

1Amanaged,cloud-basedplatformforconnectingtoIoTdevices.2Providesapersonalcomputer(PC)thatenablescustomerstorunprogramswithoutprovisioningormanagingservers,andcustomerspayforthecomputertime.3Aclouddatabaseservice.4SimpleNotificationService—amanagedpush-notificationservicethatsendsindividualmessagesorbroadcastsmessagestolargenumbersofrecipients.

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platformtobuildautomaticreorderingexperiencesfortheircustomers.SelectedconnectedDRSdevicesinclude:

• AesopWorks’ iUSHU,asmartdevicethattracksmedicinesandfooduseand provides statistics on the phone; it ensures patients take theirmedicineandkeepsitawayfromchildren.

• Brita Infinity SmartWater Pitchermonitors the status of the filter andwhenanewoneisneeded,placesanorderviatheuser’swi-finetworktoAmazonDashreplacement.

• GEAppliances’wi-ficonnecteddryersanddishwashersinteractwiththeAmazon Echo intelligent appliance and will soon support automatedreordering of dryer fabric softener sheets and dishwasher detergentpacks.

Other appliance and device makers that use DRS include: AESOP-Works(medicineandvitaminsconsumptiontracking),August(smartlocks)Behmor(coffeebrewingsystem),CleverPet(petfoodmonitoring),Gmate(diabetesmanagementsystems),GOJO/Purell(handsanitizers),Hershey(candy),JPOCertified (industrial controls), Neato Robotics (vacuums), Obe (pets’foot/water consumption), Oster (smart pet feeders), Perfect Company(appliances), Petnet (smart pet feeders), Samsung (laser printers), SealedAir (soap dispensers), simplehuman (garbage cans), SmartThings (homeautomation),Thync(wearableenergystrips)andWhirlpool(washers,dryersandsmartdishwashers)andVivint(homesecurity).

SourceofDataTheDashisbydefinitionadevicethatisrichlyconnectedtoAmazon’scommerceandreplenishmentsystem.Itprovidesdataonthetime,frequencyandlocationoforders,foreveryDashbuttoninaconsumer’shome.ThedeviceisaproprietarysourceofinformationforAmazonwhichitcanusetooptimizeproductassortment,shippingmethodsandtomaximizetheprofitabilityofeachDashitemorsetofitems.

Source:Shutterstock

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DASHOPERATIONTheDashisasimple,one-buttondevicethatbearsthelogoofaparticularproduct stuck to the surface via an adhesive strip. The Dash connects toAmazon’s servers via the user’s wi-fi network. It is configured via asmartphoneapp.Whenthebuttonispressed,thedevice’sLEDilluminatesand it sends an order to Amazon to ship a predetermined quantity ofproducttotheuser’saddressonfile.

TheDash aims to remove the tedium from refilling ordinary consumablessuch as coffee, detergent, diapers, razors and certain food items. It savestheconsumertime.

The Dash button features order protection to prevent accidental pressesfromplacingmultipleorders.Oncethebuttonispressed,itisdisableduntiltheitemisdelivered.Theuseralsohastheopportunitytocancelanorderonlinebeforeitships.

The key component in theDash is theUSI (Avnet)microcontroller,whichalso includesan802.11b/g/nwireless (wi-fi) controller, amemory chip, aprinted-circuit board, a light-emitting diode (LED) and an AAA battery.BitsofCents.com estimates the cost of the device at about $5, whichsuggests Amazon sells the buttons at around cost. A photo of the Dash’sprinted-circuitboardisincludedinFigure2.Duetothedevice’slowpowerdrain,BitsofCents.comestimatestheDashcanoperatefortwoyearsonanAAAbattery.

Figure1.AmazonDashButtonInternals

Source:bitsofcents.com

In the setup process for the device, the user can select from a variety ofproducts to order. For example, a press of the Tide button will place anorder for one of the following 14 varieties of the detergent, as shown inFigure3.

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Figure2.TideOrderOptionsforDash

Source:Amazon.com

Amazon currently offers more than 150 Dash buttons in the categorieslistedinFigure4.

Figure3.CategoriesofDashButtons

Category TypesofItems

HouseholdSupplies Airfresheners,batteries,candles,detergent,dishwasherdetergent,disposablecups,fabricsoftener,guitarstrings,householdcleaners,paper,papertowels,resealableplasticbags,toiletpaper,trashbags,waterfilters,wipes

Grocery Beverages,chocolate,chewinggum,chips,coffee,crackers,healthbars,juices,macaroniandcheese,oatmeal,popcorn,soup,snacks

Health&PersonalCare Familyplanning,femininehygiene,healthsupplements,incontinence,medicines,razorblades,soap,vitamins

Pets Catfood,catlitter,dogfood,pettreats

Kids&Baby Babyformula,babywipes,Nerfdarts,Play-Doh,skincare,snacks

Beauty Creams,haircare,makeup,shampoo,skincare

Source:Amazon.com

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DASHHISTORYANDMETRICS

AmazonlaunchedtheDashbuttononitswebsiteonMarch31,201.Thisledsomevisitorstobelieve itwasanearlyAprilFool’sDay joke,sincepunditsdoubted consumers would be so lazy as to want to order products bypressingasingle-buttonratherthanonline.

Initially, thebuttonwas invitation-only.However, thebuttonsweremadeavailabletoallPrimemembersinJuly2015.

Althoughonly10buttonswereavailableinitially,thenumberincreasedbyafactoroftenonthedevice’sfirstanniversaryandincreasedanother50%inthefollowingthreemonths,asshowninFigure5.

Figure4.NumberofAvailableDashButtons

Source:Companyreports

Fromastandingstart,hundredsof thousandsofDashbuttonshavefoundtheirwayintoconsumers’hands,andtheorderratehasexplodedinrecentmonths.

BasedonbrokerPiperJaffray’sestimateof300,000–500,000DashbuttonsshippedasofOctober2015,FungGlobalRetail&Technologyestimatesatleast600,000buttonshavebeensoldto-date.

AmazonreportedinJune2016theorderratehaddoubledinthreemonthsand that itwas receiving two orders perminute. This annualizes tomorethanamillionordersayearsinceoneyear=525,600minutes.

In August 2016, Amazon expanded the geographical availability of itsbuttonsbeyondtheUStoincludetheUK,GermanyandAustria.

COMPETINGPLATFORMS

Kwik is a startup based in Israel that also offers a one-button orderingdevice. It differs from Amazon’s Dash because it is an open IoT platformthatretailersconnecttotheirordersystemthroughaneasy-to-implementapplication program interface (API.) Kwik’s platform also provides adashboard for its users that gathers customer data, including total clicks,orders and conversion rates. Brands are offered a direct channel to their

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customersandtheopportunitytocollectreal-timedataabouttheirbuyinghabits.

There isalsoa largepotential forsingledevices thatareconnectedto theInternetforreplenishment,suchaswaterbottlesandprinters.

In October 2015, Thermos, in conjunctionwith Fitbit, announced a smartwaterbottle that syncswitha smartphoneappviaBluetoothandenablespeopletomonitortheirhydrationlevels.

Hewlett-Packard(HP),whichheldadominant46%shareofthelarge-formatprinter market in 2Q16 according to IDC, offers its own replenishmentprogram and subscription service, called HP Instant Ink. HP printers alsocomewithSureSupplysoftware,whichmonitorstonerlevelsandfacilitatesreordering—allfromHP.

The brand, Poppy, developed a line of home appliances—coffee makers,baby formula makers and pet-food dispensers—with replenishmentfunctions,howeverlinksonitswebsitenowdirectvisitorstoAmazon’sDashReplenishmentService.

CONCLUSIONInitially derided as an April Fool’s Day joke, Amazon’s Dash buttons havecaught on with consumers who love the convenience of reorderingdetergent by simply pressing a button attached to the washingmachine,rather than standing in line at a store or logging on to the Internet. TheDash buttons are a Prime-only benefit that offer value to members andenticenon-memberstosignup.ThebuttonsareaboontoAmazonbecauseof the favorable prices and data they provide to the company. The DashbuttonisjustonewaytoconnecttoAmazon’sDashReplenishmentServicethatcaterstomanyofourneeds.

Source:Amazon.com

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DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:[email protected],CFASeniorAnalyst

HONGKONG:8thFloor,LiFungTower888CheungShaWanRoad,KowloonHongKongTel:85223004406LONDON:242-246MaryleboneRoadLondon,NW16JQUnitedKingdomTel:44(0)2076168988NEWYORK:1359Broadway,9thFloorNewYork,NY10018Tel:6468397017

FungGlobalRetailTech.com

dash buttons: sprinting to success - deborah weinswig · water pitchers, dishwashers, robotic...

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