Amazon just killed the Dash button, a tiny gadget that you put next to the products that you commonly use – in a cabinet or on a shelf – so that when you are running low all you need to do it push it to order more. It launched with brands like Tide, under the assumption that it’s a convenience to be able to click – not even on a website – at the moment when you know you need more.
In theory, it helps people avoid forgetting to buy more, which for washing clothes can be a slight inconvenience, or for something like pet food, can be a big pain in the ass. Just try explaining to your cat that she has to wait for dinner because you have to pack your kids into the van and run to the store.
But clearly, the utility is just not strong enough to keep a product like the Dash button alive. You have to replace the batteries, of course, and keep it connected to WiFi. Now that Alexa lets you order more with your voice from anywhere in your home, it doesn’t make sense to have separate buttons around the house. Amazon has be to given credit, they never shy away from innovating their own products out of the market.
But the real utility of the Dash button still makes a lot of sense, and the underlying need can be traced back to something I wrote about before. What’s better than one-click buying? Zero-click buying, and now we’re starting to see brands jump into the game.
The recurring revenue opportunity
E-commerce provides an opportunity unlike any we’ve seen before. Many sites now give you the option to auto-replenish. Meaning that when you check out you can select the next time you want the same item shipped to you again. Usually this is measured in frequencies (once a month, once every three months, etc).
Let’s say you get a puppy. You’re going to need some dog food. And unless you are planning on leaving your gate open in your yard, you’re going to have to buy dog food on a regular basis for the lifetime of the animal. When you buy your dog food on Petco.com, you can select how often you want a new bag delivered to your home. Now you never have to worry about running out of dog food again. They send you food, your card is charged each time, no thinking necessary!
The next logical step is to take this further and enter in not just the frequency but the race of dog and their birthdate. Services can then help you make sure your dog is getting proper nutrition throughout their entire lifespan by sending you puppy food then adult food as your little pupper grows up. And it can even send you different types of food depending on the season, like if your race of dog sheds and rebuilds its coat.
It’s not just useful items like dog food, other brands are getting into the game too. Armani fragrances lets you select your replenishment rate on their website, and they will send you the bottle that you bought at the frequency your desire. If you select every three months, that’s how often you will receive a new bottle of perfume.
This type of recurring revenue is the holy grail of 21st century business. Recurring revenue companies trade at multiple times their yearly revenues. Businesses don’t have to fight over visibility each time you walk into the store. Customers are essentially pledging their loyalty and businesses can start to calculate the golden standard of KPIs: lifetime value.
Consumers are very susceptible to pricing though, so businesses can’t just rest on their laurels. Brands that offer services like the dog food example can justify higher prices by making sure that people perceive the service as having an additional value. Brands can even say: “hey, you’re going to spend 400€ on your dog each year, pay up front and we will offer -20%.” That’s one way to lock in customers.
These types of deals help businesses just as much as they help consumers. Brands want to predict revenue, but it’s always best to have cash in the bank. Someone who signs up for recurring purchases and then jumps ship can throw off the books.
In many ways this is where e-commerce (and commerce in general) is going anyways. In my past article about zero-click buying, it’s now getting easier than ever to predict what people will want to buy based on their past purchases. Things like diapers are a dead give-away. From your first purchase of diapers, the store where you bought them knows that you will be buying them for the next 30 to 36 months.
AI-assisted services can go even further, like Target did when they read their customers’ signs to find out who was pregnant, even before the father knew! This was way back in 2012, so imagine just how good those services can be today.
On the other hand, those types of services are extremely creepy. Even if I did want a product that was predicted to me by a service, I might not accept it based on the fact that I am my own human being and I want to believe that I control my destiny. Self-declared recurring purchases, like Petco and Armani fragrances, remove that existential block and the creepiness factor. More and more services are going to need to based on declaritive desire, and thus the battle for establishing value is on.