Amazon launches Amazon Checkout!

Note: I clarified this post here with another post.

We've been reporting growing reports of a purported "Amazon Paypal killer" that have been increasing from a low hum to a deafening buzz lately. 

Well, today Amazon has launched the Amazon Checkout website (but no press release yet?).  Amazon Checkout (I'll call it AC for short) is the next logical step for them in payments, moving them from a simplistic payment API to a full-blown portable checkout system. Like google checkout or Paypal express checkout, AC gives internet retailers the ability to provide an Amazon checkout experience on any website.

This is an interesting entry into the market for several reasons.  Let's look at the pros and cons:

Pros:

• 81m reasons to love AC - Amazon reported in Q2 that Active buyers at Amazon grew 18% to 81m. I'm going to guess that easily 95% of those have their 'wallet' at Amazon.  AC gives that wallet portability.  Personally Amazon has the best wallet information for me of anyone. They have several personal/biz CC's and probably 25 different addrs that have been used over the years for gifts, etc. Giving that portability is the single biggest attraction of AC.
  • Note that Paypal has 62m active accounts, growing at 18% y/y so Amazon leaps ahead on this metric. Paypal does not break out this metric by 'paypal classic' (payment mark) vs. paypal express checkout (PPEC)
  • Google Checkout does not release these metrics.
• 1-click. Amazon owns the patent on 1-click and it looks like this could/will bring 1-click to any site.
• Volume!  Remember that this is the dog food that amazon has been eating for a long long time.  This payment system already enters the world with $4b/Q or a $16b/yr TPV rate thanks to Amazon direct-TPV alone. 
  • Note that Paypal does about $16b/Q and Google doesn't report, but it's much smaller than these so AC enters the race with a solid second-place showing.  Also, Paypal doesn't break out PPEC.  PPEC has been very buggy for our customers and most have it turned off because it doesn't work with many eBay features. If you defined the market as "checkouts" then AC could very well be a significant leader by TPV.
• Robustness - Volume has the side-benefits of increasing robustness.  Robustness means many things such as: excellent fraud technology, up-time (if AC is down, Amazon is down), etc.

Cons:

• Amazon's biggest weakness in general in the world of ecommerce technology like this is that they are trying to be both a technology provider to retailers and a competitor.  Large retailers (TRU, Borders, etc.) have left Amazon's third party business en masse because of this and I don't imagine they will be jumping for joy to add Amazon's checkout to their sites. For example, you won't be seeing Wal-mart.com add this any day soon.  This actually plays to PayPal and Google's advantage and I'm sure as a first response we'll see them play up these fears: "Do you REALLY want Amazon seeing all of your transactions, learning about your top sellers and then using that data to compete with you?"  The fact that Amazon has a well documented history of using partner data to their advantage in the third-party selling world will make this argument very believable.
• Fees - The fees are pretty standard, if not on the high side.  I was hoping we'd see something bold like ACH for a nickel or something like that.  As-is they are kind of 'yawn'.   It could be that this is initial pricing and maybe by the holidays they will run some special pricing.  It could be they are also looking to understand the fraud models.
• Traffic? - GC and PPEC both offer traffic benefits as they are tied to search engines and enhance CTR via a cart icon/badge system.  Amazon doesn't have anything like that at this time.  It would be interesting to see Amazon explore something like this.  I'm warming up to live.com for product-based searches, so maybe there's an angle there.
• AC not on eBay - How fast do you think it will be before eBay adds this to the banned payment list because it isn't "proven to be safe" like they did Google checkout?

Amazon Checkout - what to watch

Given the pros/cons outline above, I think what we'll see is AC get some initial traction in the mid-tier and SMB areas for internet retailers.  Then there are some verticals like travel that are so hungry for user acquisition that I can see them adopting AC much as they have PayPal and GC.   I don't think you'll see any of the top 100-200 retailers adopting it due to the competive threat, but I could be off base here, we'll be keeping a very close eye on that.

Given the SMB/mid-tier likely sweet spot, I think Amazon will need to sweeten the pot some and offer better fees as well as some ability to get in front of those 81m active buyers.  Maybe AC could be tied into the Product Ads system?

PayPal vs. AC - eBay vs. Amazon - a second battlefield opens up.

PPEC has several advantages over AC, but in that mid-tier and SMB space is going to be hand-to-hand combat.  Given that Paypal is the jewel in eBay's grown, if AC can knock 1-4% points off of of the Paypal merchant services (off-ebay biz), that could be a significant headwind for eBay corp.  It's also interesting to note that the two companies are now engaged in two battles vs. the one (ebay marketplace vs. Amzn 3P)

ChannelAdvisor and Amazon Checkout
We're taking a wait and see approach on AC.  We know that it won't be able to be used on eBay, thus it would be most applicable to our ecommerce customers. Right now we're spending cycles on a premium version of our store offering as well as (ironically) lots of work on the Amazon 3P system for the holiday selling season.  I'd love to hear what customers and non-customers think about AC and if they would want to adopt it or do the cons outweigh the pros?

Seeking Alpha disclosure: I am long eBay and Google

Comments

[Fruity]

Maybe for the bigger sellers they might not want to have AMZ collecting that much info, but I sure as heck want LESS OF EBAY PROFILING. Fact is all of them are data mining & dicing us up. I think there is a better buyer base with Amz and with their one click, I'm not too sure but I think its much safer than using PP. I dont get spammed like I do with my PP address.

[Arie Shpanya]

Hi Guys,

Indeed amazon is pretty notorious for it's Third degree price discrimination methods:
Actually, they were the first to adopt (even before airline companies) such techniques to the online market (price adjustment for customers that can pay more):
In September 2000, Amazon.com got headlines when customers found that the same DVDs were being offered to different buyers at discounts of 30, 35 or 40 percent. Amazon insisted the discounts were part of a random "price test," but critics suggested they were based on customer profiling. After weeks of bad press, the firm offered to refund the difference to buyers who had paid the higher prices. The company vowed it wouldn't happen again.

and 8 years later i believe that amazon have learned their lesson. if they improve their "Volume Discounts" tier in 0.5% at least - that can drive some merchant traffic to their service.
bottom line, along with the last year trend of amazon online sales growing and Ebay shrinking- i would think implementing AC option in the eCommerce solution of CA will certainly can be added value.

Thanks

[Eran]

I posted this in the ThinkTank the minute I read about Amazon Checkout.

http://thinktank.channeladvisor.com/story.php?title=Integration_with_Amazon_Checkout_-_Must_Have

So far it hasn't received much love.

Bottom line, so many online shoppers have Amazon accounts and are familiar with 1-Click checkout, that it would be a huge missed opportunity not to integrate this payment option with CA stores.

[brian]

Thanks for this information.

[Gary]

Looks serious, they already have modules for zencart and Oscommerce

Sorry no MIVA yet :-) I hear CRE is next in line.

http://www.amazonsellercommunity.com/forums/forum.jspa?forumID=39

http://www.amazonsellercommunity.com/forums/forum.jspa?forumID=40

Interesting that they would embrace the opensource store owner community.

[Josh]

Wow, the fees are rather high. I was a little shocked to see that they are charging so much, especially for a checkout that has not had any adoption yet. I think it is going to be hard for them to get a toe hold with Google checkout and paypal because 1. people in my opinion have checkout fatigue (to many versions of checkout when you buy something), and 2. the rates are not compelling enough to add it at this point.

[Andy Geldman]

I think a lot of sellers would benefit from offering Amazon Checkout.

The Amazon name is known and trusted by buyers, most of which will already have an account with them, and it has a more solid business-like feel than PayPal which is associated with eBay's history of unregulated amateur selling.

[nicole]

Today I tried to add Amazon Checkout to my website along side of my Paypal buttons. After I had all the pages done, I realized that the buttons don't support multi-quantity items. So for me, people always order many of my items at once, but I don't need a shopping cart because it's many of the same exact item. Anyhow, I called Amazon for help and they didn't even know what Amazon Checkout was. I couldn't believe it. I felt like I was speaking another language. I had to remove all the buttons off my website and realized that I am unable to code any of the fancy stuff to get the job done. So, I signed up for the whole thing for nothing. Oh well. I am long Ebay and Paypal.

[Amy]

Thanks for this informative post! Very interesting!

That is an interesting point, about one of the cons being Amazon competing with its sellers. For ebayers who specialize in selling antiques and collectibles, that probably wouldn't be much of an issue. For other niches, I can definitely see the concern.

[Randy Smythe]

I think getting access to 81 million Amazon customers on your own website is worth the trade-off. Amazon is going to source the product that makes the most sense, this data just makes it easier for them, though I'm sure they would prefer sellers own the inventory and warehouse it with them.

Jeff Bezos wants to take over the world.