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Amazon Local Register to challenge Square and PayPal

August 14, 2014

Amazon.com may not operate brick & mortar stores, but the e-tailing giant is looking to establish a presence at retail with a new credit and debit card reader and app for businesses.

Amazon Local Register, as it is called, was unveiled yesterday and in true Amazon fashion the new point of sale system is priced below the competition. The reader is priced at $10 and participating merchants who sign up before October 31 will be charged 1.75 percent on all swipes until January 1, 2016. Amazon's standard swipe rate will be 2.5 percent compared to the 2.75 percent charged by PayPal and Square. Funds from transactions are deposited directly into a bank account within one business day and made available on Amazon within minutes.

Businesses that use the reader will also have the first $10 in transactions fees credited back to their accounts, making the device essentially free to acquire. Those that buy the reader will also receive free two-day delivery of the device.

[Image: Amazon Local Register]

"From clothing stores to contractors, food trucks to accountants, businesses and organizations using Amazon Local Register will enjoy industry-leading low rates, trusted and secure payment processing, and access to award-winning customer support," said Matt Swann, vice president of Amazon Local Commerce, in a statement. "We understand that every penny and every minute counts, so we want to make accepting payments so easy and inexpensive that it no longer gets in the way of a business owner doing what they love – serving their customers and growing their business."

Amazon's reader is compatible with smartphones and tablets, including Apple devices running iOS7, Kindle Fire tablets and some Android phones. While not presently compatible with Amazon's new Fire phone, it will be shortly.

With all the apparent positives associated with Amazon's reader, some may still hesitate to join a service offered by an erstwhile competitor. Amazon is also offering reporting features with Local Register, including sales trends, peak sale periods, etc. Having access to this information will not only enable Amazon to see how consumers shop online, but gain greater insights into brick & mortar operations, as well.

Discussion Questions:

Will Amazon Local Register catch on with small and medium-sized retailers and foodservice operators? How do you expect others in the space to react to the launch of Amazon Local Register?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is Local Register to be successful for Amazon?

Comments:

I think I'm very old fashioned. If I were running Amazon, I'd focus on making its core business more profitable instead of starting new marginally-profitable businesses where there are already entrenched competitors (who ALSO don't make money).

But I'm old fashioned.

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Paula Rosenblum, Managing Partner, RSR Research

Do you really want to give a huge competitor access to your sales data? This is the question that retailers should ask before adopting Amazon's Local Register. This is a smart move by Amazon. It gets a brief float on all funds it processes, but more importantly, it gets a new source of valuable data which it can use to sell more products to consumers.

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Max Goldberg, President, Max Goldberg & Associates

This is bigger than payments, this is the pre-phase to offer small retailers an endless aisle of Amazon inventory with ship-to-store capability (similar to Walmart, etc.) to the local store for pickup.

Ed Dunn, Founder, (Stealth Operation)

Local Register will catch on, especially during the busy seasons. The trick is that small and medium retailers are getting better at using POS data for marketing and all retail operations purposes. Local Register will have to be able to integrate with the retailers core solutions and support inventory apps and other back office applications.

Offline operation may be an issue for Amazon, along with the many other functions required in a POS solution.

Since I grew up in the POS world it still amazes me at how some of the fast app shops create POS apps but do not consider the fact that POS is an extension of a true end-to-end retail process. They just think it is a money collector you hang on your belt.

Last, Amazon and shopper data. Is this the real strategy for Amazon? Rights to the POS data to enhance their online store and expand relationships with their shoppers via their competitors? Hmmmm, I smell a fishy POS situation ...

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

Square has a pretty good stronghold in the market, and there are others already out there competing for market share, but if Amazon can offer a lower price and better incentives then it could do well.

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Debbie Hauss, Editor-in-Chief, Retail TouchPoints

For small businesses who are not linked to a group of stores, this will do pretty well. This will fill a niche, and Amazon knows how to low-ball the competitors on their transaction costs. This is big business, and Amazon will carve out their share of this market, as the lower rates are enticing.

Can they make money at this? Maybe not, but if it drives out a main player, which is my guess, than the market share will increase, along with the higher fees in the future, which makes Amazon the winner again.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Max, Max, Max is right, right, right! This is another way for Amazon to get its mitts on competitive data, and then, guess what? Compete with you. We have a paper coming out on how Amazon is already doing this with their marketplace vendors' best sellers. Retailers beware!

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Naomi K. Shapiro, Strategic Market Communications, Upstream Commerce

If I was a retailer, I would use this to drive a lower deal with a different vendor. While the technology maybe great and work extremely well, beware of a wolf in sheep's clothing.

"Amazon is also offering reporting features with Local Register, including sales trends, peak sale periods, etc. Having access to this information will not only enable Amazon to see how consumers shop online, but gain greater insights into brick & mortar operations, as well."

Does anyone think Target still doesn't have some regrets?

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Bill Davis, Director, MB&G Consulting

The old saying is, "keep your friends close and your enemies closer." Then again, if I'm a retailer, I have to think twice about getting in bed with a competitor like Amazon.

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Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Many folks are focused on whether small retailers will (or should) get in bed with Amazon. While I understand the alarm and warnings, I believe there will be many retailers and other businesses who are able to leverage Amazon's core platform offerings for transactions, logistics and fulfillment. There are many ways that these businesses may still thrive with brand, product and service differentiation. Whether the benefits of leveraging Amazon outweigh any competitive risks is certainly a valid concern. I'm interested to see whether Amazon ultimately plays nice and is happy being "the platform" and enabling brands without taking the customers away.

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Matt Schmitt, President, Chief Strategy & Innovation Officer, Reflect

I'll put myself in the minority here. I don't worry as much about the data sharing risk.

e-tailers selling on the Amazon marketplace have reason to worry about data sharing. Small local retailers might have psychological misgivings. But home contractors, food carts and the like have little to worry about.

Yes, Local Register is part of a bigger play. Amazon is going to become a more effective marketplace for local businesses. But it can't sell plumbing services, only plumbing marketing. In the real estate world, some agents bemoan Zillow as it disrupts the old marketing order. But the more successful agents have figured out how to capitalize.

Successful local businesses got in early on Google, Facebook, Zillow, Findlaw and other online services. Early adopters will take a good, balanced look at Amazon Local Register (and initially save 35 percent over Square in return for their trial).

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Dan Frechtling, Vice President, Global Product Management, hibu, PLC

Camel's nose under the tent, here. Any application that gives retailers reports on sales trends is also supplying those same trends to Amazon. Have we learned nothing about the way they work?

There may be some Mom & Pops that find this attractive, but enterprise will avoid it like the plague, as they should.

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Cathy Hotka, Principal, Cathy Hotka & Associates

For those who sell sporadically at fairs and markets, this service could be helpful in keeping their costs down. These types of merchants would most likely not have to worry about Amazon.com as a competitor because they create hand-crafted goods or sell locally produced items for a niche market. This is probably true for the local service provider as well. Most of these merchants are already set-up with Square or Intuit.

Those who run small brick and mortar stores, on the other hand, could be putting themselves at risk to find Amazon.com their competitor down the road.

'RetailRetell'

Doubtful. The only attractive part is the $1.75 service charge. Besides, most small retailers I see are already using the Apple device, which just so happens to be more in line brand-wise with smaller retailers.

After Amazon dropped all those cookies on my computer (try looking something up on Amazon then call up ANY other web site—you'll see an ad for that item, available at Amazon, in the banner ads), I'm not so sure I want to give them even more info about me, my store, what I buy, sell, where I'm at ... anything.

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Lee Peterson, EVP Creative Services, WD Partners

"Businesses that use the reader will also have the first $10 in transactions fees credited back to their accounts, making the device essentially free to acquire."

Uhmm ... any business unwilling—or unable—to lay out $10 doesn't sound like a customer worth having, which leads us pretty much to what Paula said. Amazon has shown it's great at selling things, less great at making money doing so, and with everything else, it's just another face in the crowd (relentless publicity notwithstanding).

'notcom'

Why not? It is cheaper to everyone in the financial exchange chain. Plus it has Amazon behind it, and will certainly garner attention. It is about time for a lower cost alternative to transaction costs in retailing!

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Kai Clarke, CEO, American Retail Consultants

This is a great idea! More competition in a technology that will help the little guys.

The question of giving data to competition is interesting but look at companies like Samsung. They are providing services to Samsung's consumer business line and to competitors. A great example is the supply of internal components by Samsung to Apple for the iPhone as well as to Samsung's Galaxy devices.

The point is, it can work. Amazon just needs to convince its clients like Samsung has.

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Gajendra Ratnavel, CEO, L Squared Digital Signage

Amazon Local is likely to catch-on with small retailers as the initial savings on the transaction fees are tempting. If I were a retailer, I would really be worried about what Amazon will do with my data.

That data could definitely help Amazon get a sense of "offline" demand signals which they could leverage extremely effectively.

Smart (non-profitable) move for Amazon, retailers beware ....

The other players in this space are perceived much better than Amazon and should use that to their advantage (friend vs foe).

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Mihir Kittur, Co-founder and Chief Innovation Officer, Ugam

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