Amazon Dash services seen growing in step with Prime

Amazon.com's Dash buttons, which let shoppers instantly order household and grocery items, are catching on with shoppers a few months after their introduction, based on early estimates.

Already 300,000 to 500,000 buttons have been shipped since Amazon first offered them to members of its Amazon Prime service, said Gene Munster, an analyst at Piper Jaffray Cos. They could reach 15 million to 20 million installations in three years as Prime, which includes two-day free shipping for $99 annually, grows about fivefold to 75 million members, he projected. One in four Prime users will have at least one Dash button by then, he said.

The buttons, which have an adhesive strip and can be mounted anywhere, let users buy an item with a single push - without going to the store or accessing Amazon's website or mobile app. They feature mostly brand-name products people use frequently but can live without - such as Gatorade, Kraft macaroni and cheese and Dixie paper plates. The devices appeal to manufacturers as a way to boost sales by preventing loyal customers from running out.

"It's all about making it easier to buy things," Munster said in an interview. "By reducing the steps, it has a positive impact on how much people spend."

While Dash lets Amazon cherry pick brand-name products, the manufacturers like it because they secure a spot in consumers' homes where - unlike on a store shelf - they aren't competing for attention. As Dash services grow and other companies follow suit the number of items shoppers buy at grocery stores may drop by as much as 40 percent, said Richard Crone, chief executive officer of Crone Consulting, who studied the Dash button on behalf of retail clients.

"This is a concept of nibbling, where they are picking off the most valuable, highest ticket items," said Crone, who came up with his estimate by comparing the goods in a typical supermarket basket with products available through Dash. "Those are items that typically contribute most to the profits of a grocery store."

The buttons work best for items that are hard to put in a regular purchasing rhythm, where shoppers aren't sure exactly when they run out, according to Daniel Rausch, Amazon's director of product management. Some 500 items are currently offered from 29 brands.

Yet the program is currently too narrow to change customer habits or be profitable for Amazon, said Sucharita Mulpuru, an analyst at Forrester Research. The Dash button represents one product compared to 30 to 40 items in a supermarket basket, she said.

"You look in your own pantry, you probably have products you are really loyal to, but if these products aren't available on a Dash button, you are not going to use it," Mulpuru said.

Also, when Amazon ships goods to a customer and a heavy bottle of Tide detergent is the only item, "that's highly likely to lose Amazon money," she said, conceding that the Dash button is still in its early stages and "the ultimate execution could be very different."

Amazon will soon roll out a second Dash service that puts appliances in charge of reordering supplies. The Dash Replenishment Service, or DRS, which is built into the appliances, may become more prevalent than the buttons, according to Munster at Piper Jaffray.

Whirlpool will release a washing machine soon that will know when you're running low on detergent and place an order for delivery. Brita is planning a "connected" pitcher that measures the amount of water that passes through its filter and uses DRS to order new filters. Brother brand printers will also be part of the program.

Amazon's "infrastructure is multiple years ahead of anyone else," Munster said. "Other retailers will want to play into these things, but they don't have the infrastructure around fulfillment and the relationship with the carriers in a cost- effective way."

Others are looking at automated ordering. In July, Target Corp. unveiled its Open House showcase in San Francisco of at- home connected technology including a coffee maker and baby monitor. Integrating reordering capabilities into appliances "is something we are thinking about," said Eddie Baeb, a spokesman for Target.

Neither Amazon nor its brand partners have disclosed how Dash may be affecting sales. Still, Kimberly-Clark Corp., which has buttons for its Cottonelle toilet tissue and Huggies diapers, plans to add more items, spokesman Terry Balluck said in an email. Whirlpool may add more appliances, said Ben Artis, the company's senior manager for connectivity strategy.

"Twenty years down the road, probably every appliance will have some way to order supply," Munster said.