Amazon's Dash to Profits from IoT

Create: 05/27/2016 - 13:00

Amazon’s Echo, Dash replenishment system and rumored retail are among a number of moves that demonstrates how business models—and profits—blur in an IoT world.

Spoken word may be a popular art form, but it also becoming popular in tech circles as well, thanks to Amazon’s Echo, a device that allows users to ask the Alexa search engine questions.

What marketers do not have to ask is about Amazon’s growing dominance. Amazon is a strong example of how infusing an Internet-of-Things (IoT) strategy raises the profitability of business models, as well as blurs where fierce competition occurs.

Amazon has worked overtime to create services that incorporate Amazon Web Services (AWS) at its core. Among Amazon’s most notable foray is Amazon Dash, a replenishment service. Using buttons with logos of everyday products, customers can instantly order replacements for preferred household items such as soap, detergent, coffee, snacks and cosmetics.

Other Amazon activities focus on growing the AWS developer community so that developers can create complimentary services and leverage partnerships. At the AWS Summit held earlier this year, executives showcased how Amazon services aid in connecting and managing devices, such as AWS Lambda and API Gateway, and they described the new offerings S3 Transfer Accelerations and the Snowball data transfer units with larger storage capacity.

At O’Reilly OSCON, a popular developer convention held in Austin, TX, Capital One explained how it had created their own open source solution for managing developer projects using Amazon AWS as a foundation. The solution aids the financial giant’s cost-cutting plans to reduce its data center footprint by 2018.

When you think about it, you realize how much of Amazon’s efforts in IoT evolved from strengthening its delivery processes. Amazon has always been known for its large warehousing facilities, first for books and product shipments, then later in databases resources. The rise of programmatic protocols has created more opportunities for Amazon to advance complimentary services. Once known among major advertising providers, programmatic has incorporated more physical aspects of IoT digital technology–namely any device that can provide data and share that data on a network.

Programmatic strategies allow Amazon to scale its services with a more physical presence and transform into a serious rival to offline retailers as well as online retailers. Think of it as if Amazon Prime advances customer experience to distinguish Amazon from online retailers, Amazon Dash allows it to do the same against Wal-Mart and Target.

Earlier this year the media debated rumors of Amazon opening a “brick” Amazon—a physical bookstore. That rumor is ironic given Amazon’s history of challenging traditional bookstores in its early days. Stores would position Amazon to sell its IoT devices, complementing its march to command consumer mindshare.

The timing to scale IoT services comes at an opportune moment for Amazon to keep its luster among investors. Amazon has been competing on price against other cloud service providers such as Google and Microsoft, but price wars can dampen profits.

Venture Beat noted that Amazon’s growth attributed to cloud services slowed, despite AWS having contributed $2.5 billion in quarterly revenue to Amazon in Q1 2016.

On the other hand, Amazon’s leadership position has been widely heralded. Jim Cramer, host of CNBC’s Mad Money, has claimed the Amazon is “the web,” noting that it competes well against troubled retailers like Macy’s and Kohl’s while attracting others to use its cloud services.

The best lesson businesses can pick up from Amazon is raising their digital assets associated to their operations as a priority for building a cohesive strategy. The current IoT era is impacting operations as well as consumer-facing media to such a degree that all stages of a business’ operations are being reimagined. That may make managers feel that their model is vulnerable, but savvy managers know it also means an opportunity for innovation.

And innovation can lead to the best word spoken by any manager: revenue.

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Pierre DeBois

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