By Leena Rao. Source: Fortune.
For Amazon’s Dash buttons, timing was everything.
The small, thumb-sized devices that let customers reorder paper towels, laundry detergent, and toilet paper by merely clicking a button debuted on March 31, 2015. The public’s first reaction was that Amazon was playing a massive prank, timed, of course to April Fool’s Day.
“It was the best bad idea of 2015,” said Forrester Research analyst James McQuivey.
Daniel Rausch, one of Dash’s creators and its current leader for Amazon, said that while the company didn’t purposefully time the launch to confuse people, it helped to drum up buzz. The buttons sold so quickly that Amazon was forced to end sign-ups after just 24 hours. “We got lucky,” said Rausch.
Two years later, Dash is among Amazon’s fastest growing services, albeit from a very small baseline. Orders using Dash Buttons are placed more than four times a minute compared to once a minute a year ago, according Amazon.
Using back of the napkin math, that’s around 5, 760 orders daily. Still that number is insignificant when compared to Amazon overall, which at its peak, handles hundreds of orders a second and raked in $136 billion in sales in 2016 alone.
Retail data firm Slice Intelligence backs up some of Amazon’s growth claims for Dash. In July 2016, there was a 650% increase in the number of orders through Dash from the previous year.
Amazon told Fortune exclusively that many brands, such as Folgers Coffee, Peet’s Coffee, Pepperidge Farm, and Ziploc, are seeing more than half of their Amazon.com orders placed via Dash Button devices. Household items are particularly popular. To date, customers have placed millions of orders with Dash Button, according to Amazon.
For example, Glad gets more than half of its orders of its 40-count OdorShield Tall Kitchen Drawstring Trash Bags placed via the Dash Button. Six of the top 10 most popular items ordered using virtual Dash Buttons online are toilet paper and paper towels.
On Tuesday, Amazon announced that Listerine, Tylenol, Pepsi, Tropicana, and Calvin Klein are among the new brands creating Dash Buttons, Fortune learned exclusively. Calvin Klein is the first brand to start selling clothes via Dash buttons.
Overall, Amazon now has more than 300 Dash Buttons for products.
For the past two years, Amazon has been aggressively pushing Dash as a way to make buying products so easy for customers that they barely think about it. All shoppers have to do is press a button on the device to reorder their items.
“The goal is to make shopping disappear,” said Rausch.
Dash Buttons are available to members of Amazon’s subscription service, Prime, for $4.99 each. But they’re essentially free because members receive a $4.99 credit to their Amazon account after the first order through a Dash Button.
Customers connect their Dash Buttons to Wi-Fi, select which product they want it to apply to, and then reorder that product by pressing the button. It lets them avoid having to log into their Amazon account on a computer or mobile device, search for what they want, and go through check out.
Amazon also recently introduced Virtual Dash Buttons, one click digital buttons that customers can save on Amazon’s online marketplace or in the mobile app. Like with physical Dash Buttons, Virtual Dash Buttons are intended to make it easier to reorder everyday items in one place—in this case, online—rather than searching for them in Amazon’s marketplace.
Brands pay Amazon $15 for each button registered plus a 15% commission for each product sold through Dash, according to reports. Amazon declined to comment about what it charges.
Forrester’s McQuivey said that most companies consider the Dash Button not so much for the direct e-commerce, but more as marketing. Most people who use Dash Buttons rarely diverge from the one product those buttons apply to. In effect, companies that get customers to use Dash Buttons eliminate the competition. Unlike in physical stores or online, rivals have no opportunity to try to get customers to change their minds.
Shoppers who use Dash Buttons spend a much larger percentage of their category dollars with the Dash brand, according to Slice Intelligence. For example, people who have the Cottonelle Dash Button went from spending roughly 43% of their bath tissue dollars with the brand before to over 86% after.
The disadvantage of the Dash button, however, is that brands don’t have a way to entice customers to buy more products, known in the retail industry as “upsell.” For example, retailers trying to get someone who is buying a bottle of Arm & Hammer laundry detergent to also get new fabric softener as well.
What many brands are most interested in when it comes to the Dash Button is the Dash replenishment program, McQuivey said. The program involves building printers, washing machines, and pet feeders with Dash Buttons built in.
A sensor automatically detects when supplies in the device are running low so that it can order more from Amazon without humans having to press a “buy” button. Amazon says that there are dozens of brands in the Dash Replenishment program including GE, Brother Printers, and Whirlpool.
Illy coffee is working on a connected coffee maker that can reorder coffee while some Oral-B toothbrushes come with sensors that automatically order new toothbrush heads when needed. Additionally, a new smart hand sanitizer dispenser Purell automatically reorders new supplies of Purell when it runs low.
Brother International, the developer of Brother printers, said that the company had considered developing its own smart replenishment service, but that it instead chose to integrate with Amazon because of the convenience, said Brother Printers’ director of marketing Rafi Haqqani, While customer sign ups for the replenishment service are growing, he didn’t reveal additional details about their numbers or how significant the service is to its business.
GE also added Amazon’s replenishment service to some of its washers and dryers. Although GE Appliances’ vice president Liz VerSchure didn’t reveal exact numbers, she said “engagement rate was high” for the replenishment service.
Amazon told Fortune that, generally speaking, shoppers are happy with the Dash replenishment service. Only a single digit percentage of Dash Replenishment users end up canceling per month, it said.
Dash replenishment solves a big problem for manufacturers that make smart machines but don’t want to get into the e-commerce and fulfillment business, McQuivey adding that it would have taken General Electric a long time to build something similar.
“With Dash and Dash replenishment, Amazon is doing what it does with AWS,” he said, referring to Amazon’s cloud business that powers computing for businesses like Netflix, Expedia and Adobe. “Let businesses do what they do best, but Amazon is the one that owns customers and fulfillment, and thus owns the world.”