Tyler Higgins, director, AArete
Amazon’s one-click patent, an innovative advance that catalyzed its growth into an e-commerce juggernaut starting in the mid-1990s, expired in September 2017. The exclusivity of the one-click purchase option was not the only reason Amazon rose to prosperity, but it did provide the retailer a significant edge in the marketplace that aided its early and continued dominance. The patent’s expiration leads to the question: What will Amazon, and other e-commerce retailers that no longer have to avoid certain purchasing options, do next?
Why one-click purchasing was so important
During the early stages of e-commerce, Amazon’s one-click purchasing tool was a triumph of convenience and gaining customer trust. With norms and expectations still forming among early adopters, Amazon helped convince customers that storing address and payment information was a convenience of online purchasing that also sped up transactions.
This approach helped build trust in Amazon and eventually extended to e-commerce companies in general. It encouraged shoppers to share sensitive information with a third party and allowed those retailers to keep the data on file and recall it with a new purchase. Although one-click purchasing with Amazon is now viewed as standard, its adoption by consumers led to major changes among other e-commerce providers that was revolutionary in many respects.
Potential strategies for Amazon’s continued evolution
Nothing prohibits Amazon from continuing to use the one-click purchase button on its various platforms. The retailer can continue to utilize this function, but now lacks complete control over the technology and the potential revenue won from licensing it to other businesses, such as Apple.
One element of Amazon’s success is a steady focus on developing new strategies to make purchasing easy and reduce the burden on consumers. Stemming from the innovation of the one-click checkout, Amazon has delivered new technologies focused on streamlining the buying process for the consumer. The Dash button put one-click purchasing into the physical world and made ordering a specific product possible without needing to access a smartphone or computer. The Amazon Echo offers far broader e-commerce capabilities than the Dash button and allows users to use voice recognition with Alexa—a virtual assistant—to purchase a variety of products.
These developments are indicative of Amazon’s drive to discover solutions that make transactions attractive, simple and easy for the consumer. Amazon’s advances thus far indicate that it will continue to pave the way for the next industry-changing innovation by developing new customer-friendly platforms and that losing exclusivity to the one-click patent will do little, if anything, to stop it.
Other retailers benefiting from the patent’s expiration
The end of Amazon’s hold on one-click ordering gives opportunities to large and small retailers to reap benefits they haven’t had before. Perhaps the most widespread benefit will come in the world of mobile commerce where there are high rates of cart and purchasing abandonment. Mobile commerce abandonment rates can reach as high as 90 or 95 percent due to the time commitment for filling out forms and checking out.
Even though mobile usage is increasingly popular, many consumers still rely on desktop and laptop computers for shopping. Widespread deployment of one-click ordering for mobile, dependent on e-commerce software developers effectively adding such a tool to their platforms, could significantly change the current landscape. Cart abandonment rates would likely decrease as individuals become more comfortable making purchases from their mobile devices.
Social media companies such as Instagram and Facebook, as well as retailers that partner with them, will also benefit significantly from this change. Instead of a multi-step process where potential customers navigate from a social site to the retailer’s direct pages, social media channels can now eliminate the traditional checkout process with one-click purchasing. Facebook and Instagram are already major platforms for marketing, but through one-click purchasing, the conversion of users into customers buying items should be much greater. The one downside is that these social media companies could now hold retailers hostage by having these capabilities, increasing the cost of ads or taking a significant percentage of the sale. Social media will be one of the first areas that will see significant impact in the wake of Amazon’s patent expiration.
Snapchat has already seized on the availability of the one-click purchase functionality with Shoppable Augmented Reality (AR), an addition that allows users to make purchases directly through the app. Companies can partner with the social media company to sponsor a photo filter that includes the ability to buy a related product without visiting a website or changing apps. This sort of context-specific offering creates bonds between the platform, retailer and consumer, leveraging a familiarity with the app to encourage buying. Other companies may soon follow suit with similar approaches.
One potential challenge retailers may face is that the edge gained by the ability to collect purchase data may be dulled if several retailers are able to collect similar information – let’s say different department stores who share customers with other department stores. While the purchase data that, for example, a Macy’s may have on a specific customer may differ slightly from the data Kohl’s has on that same customer, the two will overlap. This may make it harder for either retailer to provide highly targeted product suggestions to customers, and so they’ll need find new ways to sharpen their algorithms. To positively differentiate themselves, retailers will have to closely examine their objectives, capabilities and workflows to make sure they can stand out to current and potential customers among the always growing pack of competitors.
The patent expiration will allow for widespread adoption of one-click purchasing, which will challenge the market to adapt quickly. There is an opportunity for major reconfiguration of social networks to challenge major e-commerce giants such as Amazon. Google could innovate the search function to allow consumers to buy directly through Chrome. Theoretically, thiscould take the form of a direction that the consumer types into Chrome’s search bar, the Google search equivalent of asking Alexa to order an item for you. Type the word, “Buy:” and then the product itself, and with your payments data prepopulated in Chrome, you set off the same frictionless, streamlined checkout process you might when you order via Alexa. From Google to Facebook and Instagram, these transformative organizations can now continue to innovate and identify streamlined methodologies for retailers to reach consumers.
The one-click patent’s expiration marks the end of an era for Amazon’s exclusivity, but certainly opens the potential to a new era full of innovations from Amazon and other retailers that can now leverage this technology.
Aarete is a global consultancy specializing in data-informed performance improvement.
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