Amazon to Offer Kindle Checkout System to Physical Retailers

Amazon to Offer Kindle Checkout System to Physical Retailers

Project Would Give E-Commerce Firm Access to More Customer Data

GREG BENSINGER

Jan. 29, 2014 5:22 p.m. ET

Amazon.com Inc. AMZN +2.28% plans to offer brick-and-mortar retailers a checkout system that uses Kindle tablets as soon as this summer, people briefed on the company’s plans said.

In one scenario, the Seattle company would give merchants Kindle tablets and credit-card readers, the people said. Amazon also might offer retailers other services, such as website development and data analysis, the people said.

To accelerate the project, Amazon last year bought certain technology and hired some engineers from GoPago Inc., a San Francisco startup that offered checkout systems linked to a smartphone app, the people said. GoPago is now a unit of DoubleBeam Inc.

Amazon’s plans remain fluid and the project might be delayed, altered or canceled, they said.

The project would thrust Amazon, the largest U.S. e-commerce merchant, into the realm of physical retail stores, where more than 90% of commerce is still conducted, and open up a new trove of data from consumers’ in-store spending habits.

But it would also inject Amazon into an increasingly crowded arena against the makers of traditional checkout systems, such as VeriFone Systems Inc.PAY -3.17% and NCR Corp. NCR -1.47% , as well as startups including Square Inc., which offers a credit-card reader that attaches to tablets and smartphones. EBay Inc. EBAY -1.82% ‘s PayPal unit is testing several ways of extending its strength in electronic payments into the physical world, including its own devices for swiping credit cards.

Because many of the largest physical retailers have extensive, complicated checkout systems that may be difficult or costly to give up, Amazon is likely to focus on smaller retailers.

Apple Inc. AAPL -0.20% is moving into mobile payments and has been meeting with industry executives to discuss options for paying for physical goods on its devices. The iPad and iPhone have become popular payment-processing devices for an array of merchants, from food trucks to Nordstrom Inc. JWN -2.63%

Amazon would bring strengths and weaknesses to the payment fray. It holds credit-card information from more than 230 million users, exceeding PayPal’s 142.6 million. But Amazon has virtually no experience in brick-and-mortar retailing and merchants might be wary of doing business, and sharing customer data, with a competitor.

“The game of mobile payments is going to be won or lost at the physical checkout, that’s where nearly all of commerce is done today,” said Richard Crone, chief executive of Crone Consulting, a payments advisory firm.

To draw in merchants, Amazon has considered allowing them to offer promotions or discounts through Amazon.com or its Amazon Local daily deals offers, the people briefed on the company’s plans said.

“At the end of the day, a merchant wants to make a sale, to drive up business. And if Amazon or anyone else can help them do that, that’s tough to turn away,” Mr. Crone said.

Amazon also might seek to create a so-called mobile wallet with stored credit-card information to help speed payments, two of the people said. The company last year rolled out a one-click digital button for processing online and mobile payments on other retailers’ websites using Amazon customers’ credit cards.

Amazon released the Kindle Fire HDX last year, the newest version of its full-featured tablet, touting security software that the company said could benefit businesses.

The Kindle is part of Amazon’s broad hardware ambitions, which include a line of smartphones now under development, according to people familiar with the company’s plans.

Amazon’s Growth Story Keeps Selling

SPENCER JAKAB

Jan. 29, 2014 4:03 p.m. ET

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“The bottom line” has earned a place of distinction, if you can call it that, on lists of hackneyed clichés. So it seems appropriate that investors in one of today’s evolving media and retail powerhouses pay it little heed.

When shares of Amazon.com Inc. AMZN -2.59% surged by 9.4% on Oct. 25, the real reason wasn’t the company’s one-cent-per-share “beat” of analysts’ estimates for the third quarter of 2013. Amazon still recorded a loss of nine cents a share.

The more likely cause was the 24% year-over-year gain in Amazon’s top line, or revenue, at the high end of Amazon’s wide guidance range. Wagering the same thing will happen again to the stock on Thursday when Amazon reports fourth-quarter results would be risky, though. It has moved by 7.3% on average following its last 48 earnings reports with the shares declining nearly half the time.

Analysts polled by FactSet have penciled in year-over-year revenue growth of 22.5% for the quarter, at the high end of Amazon’s guidance of 10% to 25%. More significantly, they also see what—for Amazon at least—is a healthy profit. Projected earnings per share are 74 cents, up from 21 cents a year before. That would be the best quarterly figure in three years, back when revenue was just half as much.

That doubling of revenue in three years is the real reason Amazon receives the benefit of the doubt from so many investors. The stock fetches the same multiple of sales, 2.6 times, that it did three years ago, meaning Amazon’s market value also has doubled.

Amazon’s growth stems in part from accepting puny margins, though—a fraction of those at retail behemoth Wal-Mart Stores Inc., WMT -0.76% for example. Mushrooming revenue certainly justifies some premium, but how much exactly? Double Wal-Mart’s multiple of sales? Triple? In fact, Amazon’s shares fetch five times as much as Wal-Mart’s relative to revenue.

The prevailing wisdom is that chief Jeff Bezos will one day flip a switch and voilà—margins will normalize on Amazon’s gargantuan revenue. But its pace of expansion would lose a step or two in that case.

Growth and profitability aren’t mutually exclusive. The two, though, would look more like what is seen at a brick-and-mortar retailer. For bedazzled investors, that is the bottom line

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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