For the world’s largest e-commerce company, Amazon certainly had a busy payments week this week, from opening a physical bookstore integrating online capabilities to pushing its Amazon button for third-party mobile apps. But it’s most PF noteworthy move this week was Amazon’s choice to give up on Local Register.
Local Register was a payments processing effort that focused on the exact kind of smaller merchant that has gravitated to Square. And Amazon’s initial promotional pricing was set lower than Square, on the rationale that price is everything for a small merchant. Apparently not.
Amazon’s thinking was that it could leverage small merchants in the physical world in the same way that it works with small manufacturers and merchants in its core third-party program.
In its shutdown announcement, Amazon said succinctly, “Amazon Register is Being Discontinued. Effective October 30, 2015, we are no longer accepting new customers. Existing customers can continue to use Amazon Register until February 1, 2016. We regret any inconvenience that this may cause.” And then to prove to everyone that you can take the payments processor out of Amazon, but you can’t take Amazon out of the payments processor, it accompanied the shutdown announcement with an automated ad for an Amazon Register Card Reader for $10, with free two-day shipping.
In an Amazon Q&A, Amazon said it is still selling the readers as replacement units for those merchants who plan to keep using the service through the end of January. And to then state the obvious, Amazon added “Amazon will not release an EMV-compatible card reader.”
My favorite part of the Q&A was Amazon’s answer to “What do I need to do?” It answered: “Identify a new payment service for your business and create a new account.” You think? It’s next suggestion was more on-point: “Download your final transaction history prior to February 28, 2016. After February 28, 2016, you will no longer have access to reports or your transaction history.”
Come on, Amazon. With your massive cloud services, you couldn’t have chosen to store and make that data available to customers for a year or two? To cut everyone off 27 days after the shutdown seems needless, especially given the relatively low cost of preserving and maintaining access to the data.
But Amazon never seemed to really care about local register, said Todd Ablowitz, president of the Double Diamond Group payments consulting firm and Partner/Publisher of PaymentFacilitator.com. “It was half-hearted from the beginning. It just seemed lackluster,” Ablowitz said. “They were going at this purely as an attempt at being the low-price option.”
While Amazon was closing one payments door, it was more widely opening another. It is expanding its Amazon Buttons for use with other third-party apps. In an interesting interview in Re/code, Amazon exec Patrick Gauthier—grabbed earlier this year from PayPal—said Amazon would ever even consider breaching the trust of small merchants. He said doing so would be tantamount to retail suicide.
“What do you think would happen to that business the instant we became even within a mile of breaching the trust of those merchants?” he asked. Amazon has said that it only sees the totals and not individual items purchased.
There are a few problems with that rationale, although Amazon is making a legitimate argument. The first is the quintessential reality-versus-perception issue. If small merchants fear giving up its data to Amazon, that’s the end of the discussion. No Amazon assurance will change that fear. This is an emotional issue.
The second concern is today versus tomorrow. Amazon’s data-handling talents are not in doubt. The fear is that Amazon is grabbing everything and, for the moment, choosing to not look at everything. Assuming merchants believe that (FYI: they don’t), the worry is about what Amazon will do with the data in the future. If Amazon’s situation changes, Amazon will still have exabytes of data from merchants all across the country that they could use competitively. If you own three clothing boutiques in Michigan, why would you take the chance?
That all said, a lot of third-party apps will love Amazon’s button because of the credibility boost it will offer. That is based on the (incredibly flimsy) online shopper assumption that Amazon somehow vets all of its merchant partners. The third-party merchants on Amazon’s site are at least covered—to varying degrees—by Amazon’s customer service. No such protections have been promised for button users, at least not from Amazon.
The last Amazon move was to open a physical bookstore in Seattle. Before we get into the details of this store and it’s borrowed-from-online functionality, it’s important to note something that is less ironic than it is ballsy and a nice example of Chutzpa. How? Amazon the web site has driven a huge number of U.S. bookstores out of business, especially in Seattle. With all of those stores shuttered, Amazon has concluded that there’s now room for one more.
As for that functionality, the books chosen leverage Amazon ratings.
“The books in our store are selected based on Amazon.com customer ratings, pre-orders, sales, popularity on Goodreads, and our curators’ assessments. These are fantastic books! Most have been rated 4 stars or above, and many are award winners,” Amazon said. “To give you more information as you browse, our books are face-out, and under each one is a review card with the Amazon.com customer rating and a review. You can read the opinions and assessments of Amazon.com’s book-loving customers to help you find great books.”