Should retailers work with Amazon Payments?

Discussion
Apr 11, 2016

Amazon last week announced an expansion of its Amazon Payments service to extend the trust and familiarity of “Pay with Amazon” to third-party e-commerce merchants.

Relaunched in 2013, Amazon Payments enables customers to check out on some third-party e-commerce sites by simply entering their Amazon.com user name and password. The intention is for customers to avoid the hassle and trust issues involved in creating a separate login with the retailer and filling in credit card and shipping information.

Last week, Amazon announced a Global Partner Program to integrate its payments option into software companies who power e-commerce storefronts for merchants. For example, Canada-based Shopify, one of the program’s partners, provides software tools for 243,000 online retailers, enabling storefronts, payment processing and apps for checkout.

“Our merchants want to offer their customers a payment solution that is trusted, easy and familiar,” said Brennan Loh, director of business development at Shopify, in Amazon’s statement.

Other partners include Japan-based FutureShop and France-based PrestaShop. Participating merchants will also receive exclusive white glove services, such as seamless integration and knowledge sharing. The benefits range across three levels: Premier Partner, Certified Partner and Certified Developer.

With fees similar to PayPal, one challenge for Amazon is overcoming retailers’ reluctance to share transaction data. Amazon has said in the past that transaction data isn’t shared and is private.

Google and Apple are also expanding in the space. Yet Amazon Payments is gaining traction. Over 23 million Amazon customers have used their Pay with Amazon accounts at non-Amazon merchants over the past two years.

While conflicts are expected to prevent larger retailers from partnering with Amazon Payments, smaller to medium-sized ones appear more open to offering convenience for their customers and gaining favor with Amazon’s customer base.

“It’s easy to think of Amazon as a big bad competitor, and that’s true,” Josh Harbour, co-owner of e-tailer Red Dress Boutique, which has been using Amazon Payments, told Bloomberg. “But merchants have to find ways to compete with them in some areas and work with them, too.”

DISCUSSION QUESTIONS:
Should small to medium-sized online sellers see Amazon Payments more as an opportunity to reach Amazon shoppers or a threat? Do you see Pay with Amazon becoming a preferred online payment option for consumers?

Braintrust
"Well of course this is a power play as well as a service offering on Amazon’s part. I suspect the pledge to protect transaction privacy will not preclude statistical analysis of aggregate data β€” a boon for their data scientists."
"Amazon could easily analyze that transaction data and start actively sending personalized marketing messages to your customers for items they wouldn’t have thought to buy on Amazon today."
"Amazon payments offer an easy way for a smaller retailer to overcome resistance from customers to providing their email and contact information "one more time.""

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17 Comments on "Should retailers work with Amazon Payments?"


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Max Goldberg
Guest
1 year 9 months ago

Working with Amazon Payments is a double-edged sword for small and medium-sized merchants. On one hand, they gain the ease and security of working with a widely recognized and respected company. On the other hand, their customer data could be later used by Amazon as competition. If I was a small or medium-sized merchant, I would not jump on the Amazon Payments bandwagon at this time unless it was demanded by customers. I’d wait to see how the Amazon/Google/Apple payment war shakes out.

Bob Phibbs
Guest
1 year 9 months ago

While shoppers might like the convenience of it, I think a very high percentage of brick-and-mortar retailers would see this as a deal with the devil and not participate. Crying that they are the small guy and about buying local then greeting customers with checkout by Amazon seems the height of inconsistency and faulty brand logic.

At least when they work with the Amazon marketplace they can shield their identity with a different name.

Ryan Mathews
Guest
1 year 9 months ago

Amazon’s track record of benefitting partners in the long run isn’t all that great. Ask yourself a few questions:

  • If you were a small merchant would you want your customers to be putting as much faith in Amazon as they do in you?
  • Should you be investing your hard earned dollars to build Amazon’s image as a trusted vendor?
  • What happens down the road one day when Amazon decides to change the terms of the deal?

As to the future of Amazon Payments, PayPal has showed us how effective a vendor-sponsored payment system can become and how fast it can scale. Given Amazon’s relationships with consumers I don’t see any reason why — at least in theory — they can’t be equally as successful.

Dan Frechtling
Guest
1 year 9 months ago

Retail businesses accept new payment options even when there is a “cost” to doing so because it increases transactions. Paypal charges merchants 70 basis points more for credit cards than acquirers do. Apple Pay charges banks 15 basis points of the purchase amount in the U.S., and somewhat less in the U.K. and China.

Amazon Marketplace got retailers over the “cost” of partnering with a competitor because it generated new business. The Amazon Payments examples suggest the story is repeating itself. AuthenticWatches.com already derives one quarter of its business through Amazon Payments, while Red Dress Boutique derives one-fifth.

But this announcement of the Global Partner program is less fraught. E-commerce platform providers don’t sell their own goods, so they have more to gain and less to lose by integrating with Amazon Payments.

Camille P. Schuster, PhD.
Guest
1 year 9 months ago

Other responders have made good points and Ryan has good questions. Given the number of hacker attacks on PayPal is there really a need for another service in that space? Will consumers trust it? Will Amazon be able to secure the interface with all the other companies that may not all have highly-secure systems? One successful attack would be incredibly detrimental to Amazon’s security image.

Liz Crawford
Guest
1 year 9 months ago

If I were a smaller online retailer I might take a wait-and-see approach. It is in the small businessman’s interests to make payments easier and faster for the shopper; however, it encourages a healthier business climate in general to have a third party like PayPal brokering payments. Amazon is an increasingly formidable market force — one that should strike fear into the hearts of retailers, brands, shoppers, delivery services and now financial services.

Kai Clarke
Guest
1 year 9 months ago

Amazon Payments can be an online payment opportunity for any retailer, since it should be examined as a competitor to any payment processor, including the traditional Visa, Mastercard, AMEX, direct swipe. Imagine going to a restaurant and using your Amazon login to pay for a meal. Just another way to pay with stored online information.

Peter Charness
Guest
1 year 9 months ago

While I trust Amazon to keep my payment card information as secure as anyone can, for the most part I know that when buying through Amazon I get great customer service on returns/inconsistencies etc. So I look at that — I look at Amazon as offering trust in safety in purchasing online. If it’s just a payment for another merchant with none of the trust then as a consumer I’m not sure that I care, and it dilutes the brand. As a medium-sized retailer I really don’t want to have anything to do with taking in/transmitting and, worse, storing credit card information, so using Amazon as a “bank” if the price is right seems fine.

James Tenser
Guest
1 year 9 months ago

Well of course this is a power play as well as a service offering on Amazon’s part. I suspect the pledge to protect transaction privacy will not preclude statistical analysis of aggregate data — a boon for their data scientists. For small and medium sized merchants, it’s important to be ready to accept customers’ preferred forms of payment. Amazon Payments may use its clout to make it difficult to exclude it as an option. In the end, payment clearing platforms are competing over share of transactions. That’s in some ways easier (less friction) than selling and fulfilling stuff. No wonder Big A wants a piece of this.

Bill Hanifin
Guest
1 year 9 months ago

Small to medium sized online sellers should proceed with caution. There are more ways to establish trust in the checkout process than branding with Amazon.

From a consumer point of view, I like it as checkout becomes an easy, trusted, no-brainer. This is particularly useful when I purchase from a boutique site where I am not likely to make multiple purchases.

For a SMB in a category where revisit and repurchase are likely, I would suggest to explore options avaliable from Visa and MasterCard to establish trust without giving away brand value.

Janet Dorenkott
Guest
Janet Dorenkott
1 year 9 months ago

It depends on the customer and demand. My guess is more and more customers are demanding it. But it also depends on the retailer and what they are selling. If they don’t compete much with Amazon, then I think they are safe. If I was a small grocer, I might consider it because it could be a competitive advantage to them. However, if I sold products that could be easily purchased on Amazon, I would have concern.

Today, Amazon might say they are not using that data internally. However, how long will that last? Amazon could easily analyze that transaction data and start actively sending personalized marketing messages to your customers for items they wouldn’t have thought to buy on Amazon today.

Herb Sorensen
Guest
1 year 9 months ago

There are THREE components to the SALE: 1. the meeting of the minds of buyer and seller — the brain part; 2. the delivery of the goods/services; 3. payment.

Amazon is in the catbird seat for global retail dominance because they manage the “meeting-of-the-minds” online, better than any other major player. They are obviously no slouches at delivery, and they are now taking a slice out of the payments business.

Fast and steady they are, at building a globally dominant retailing engine — online. Their bricks efforts so far are pathetic in comparison to the better bricks operators.

But Amazon is FAR from their own endgame, and with this “pay” initiative you can see they are now going after the third essential component of retail. Well, duh! Just because the rest of the retail world doesn’t think this way is just an additional reason AMAZON WILL BE THE GLOBALLY DOMINANT RETAILER BY-AND-BY! πŸ˜‰

William Hogben
Guest
1 year 9 months ago

This is part of the overall movement of smaller online stores into Amazon. While it may not lead anywhere good in the long run, in the short term it boosts conversions and so what choice do these merchants have?

Arie Shpanya
Guest
1 year 9 months ago

I’m sure the cost of Pay with Amazon is very competitive and it is a trusted brand for consumers. These are just two of the potential benefits for retailers. But on the other hand, one of the biggest upsides of this for Amazon would be access to transaction data. If they say it isn’t shared, what else are they trying to get out of this besides the fees retailers will pay them?

Mark Price
Guest
1 year 9 months ago

Amazon payments offer an easy way for a smaller retailer to overcome resistance from customers to providing their email and contact information “one more time.” The key to success for the retailer will be to be able to obtain that information from Amazon, so that they can directly contact their customers. Sharing the customer information with Amazon is a critical issue for larger merchants — for smaller ones just trying to gain traction, it is not such a big deal.

Naomi K. Shapiro
Guest
Naomi K. Shapiro
1 year 9 months ago

“Double-edged sword … deal with the devil … the pledge to protect transaction privacy will not preclude statistical analysis of aggregate data.” And if it’s not to do statistical analysis on specifics, Amazon can certainly ascertain trends from this data. Small to medium-sized online sellers may equal small to medium threat from Amazon. However, there were a ton of great reasons given to stay away — far away — from this relationship.

Shep Hyken
Guest
1 year 9 months ago

I realize there are concerns with the security of Amazon using the data. However, I think they won’t. I’d like to see their agreement to know for sure, of course. They know that is a valid concern, which they eliminate with a contractual promise.

With that out of the way, the idea of using an excellent payment system, such as Amazon.com’s, that is made available to smaller businesses is a win for everyone. Offering various payment options, which could include credit cards, PayPal, etc., can be streamlined and professionalized by their system. Don’t fear Amazon. Embrace Amazon. They have a lot to offer smaller businesses.

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Braintrust
"Well of course this is a power play as well as a service offering on Amazon’s part. I suspect the pledge to protect transaction privacy will not preclude statistical analysis of aggregate data β€” a boon for their data scientists."
"Amazon could easily analyze that transaction data and start actively sending personalized marketing messages to your customers for items they wouldn’t have thought to buy on Amazon today."
"Amazon payments offer an easy way for a smaller retailer to overcome resistance from customers to providing their email and contact information "one more time.""

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