In its second-largest acquisition, Amazon buys the company for $970 million.
Other web merchants can offer Amazon’s 81 million active customers the option of paying via their Amazon accounts. The two new services, Checkout by Amazon and Amazon Simply Pay, put Amazon into the crowded mix of alternative online payment services.
The 81 million customers with active Amazon.com accounts can pay with a single click at Amazon.com, without reentering payment or shipping data. Now Amazon.com Inc. will let other online retailers offer that same payment option to Amazon customers.
Amazon this week unveiled two payment services, Checkout by Amazon and Amazon Simple Pay, which enable other e-retailers to process payments through Amazon. Checkout by Amazon includes some features, such as shipping and tax calculation and order management services, which Amazon Simple Pay does not. Amazon has been testing the payments services since last summer.
Amazon is touting the services as a familiar and convenient way for Amazon customers to shop elsewhere on the web. Amazon, No. 1 in the Internet Retailer Top 500 Guide, notes on its web site that Checkout by Amazon “can identify Amazon.com customers shopping on your web site and offer them Amazon’s 1-Click experience. This allows customers to place orders instantly without leaving your web site.” With a single click, consumers can pay at Amazon with a payment method they have previously registered.
Amazon’s brand recognition and large customer base are important advantages as it seeks to become a payment option on other e-commerce sites, says analyst Ed Kountz of JupiterResearch. But he notes that there are already several non-card payment alternatives vying for merchants’ attention. These include eBay Inc.’s PayPal and Bill Me Later, each offered by 16 of the top 50 online retailers, and Google Checkout, which is offered by 6, according to JupiterResearch. The relatively low adoption of Google Checkout, which was introduced in June 2006, “is an indication that just because you built it, it doesn’t automatically build itself out,” Kountz says.
The biggest draw of these new payment services will be the 81 million consumers already familiar with checking out on Amazon, says Scot Wingo, CEO of ChannelAdvisor Corp., which enables retailers to sell through such online marketplaces as eBay and Amazon. This is likely to attract small and mid-sized retailers, but bigger players will stay away because they view Amazon as a competitor, Wingo says.
Another concern for all retailers considering the service, Wingo says, is that Amazon will use the data it collects about what’s selling to enhance its own product offerings. An Amazon spokesman replies, "We simply plan to use the data to improve the service for our merchant customers."
Amazon says it will charge no start-up or monthly fees, and not require long-term contracts for e-retailers that sign up for Checkout by Amazon and Amazon Simply Pay. Amazon will charge 2.9% of the purchase amount plus 30 cents for transactions of $10 or more for merchants whose monthly Amazon processing volume is under $3,000. The following discounts apply based on monthly volume: $3,000 to $10,000, 2.5% plus 30 cents; $10,000 to $100,000, 2.2% plus 30 cents; over $100,000, 1.9% plus 30 cents. Amazon will charge 5% plus 5 cents for transactions under $10, providing an option for e-retailers that sell very low-priced goods, such as music tracks or magazine articles.
Google Checkout merchants pay 2% plus 20 cents per transaction, and can apply those fees to their search marketing spend with Google. PayPal charges 1.9% to 2.9% plus 30 cents.
Like Wingo, Colin Sebastian, an equity analyst at Lazard Capital Markets, says larger online retailers may see Amazon as a threat, making them less likely to use Amazon’s payment services. “Small and mid-sized retailers are more likely to see Amazon as a potential partner than as a threat,” he says. “If you’re already selling through Amazon you may see it as a natural extension to add Amazon payments.”