This year sees the end of Amazon’s patent on its one-click payment technology in the US, a moment which could have big ramifications for American retailers and consumers alike. Amazon have owned the patent since 1999, and have enjoyed seismic growth in no small part thanks to the ‘frictionless’ payment experience that it offers US consumers.
The concept is simple: your payment and address details are stored so that every time you return to make a purchase you only need to click one button. This removes the faff of having to reach for your wallet and type out your details again. But its simplicity belies its importance; some estimates have it that the technology is worth as much as $2.4bn to the retail giant.
There is no doubt great value in easing the customer’s purchase journey in such a way. The fact that Amazon have licensed out the patent to other online behemoths such as Apple (imagine iTunes without one-click payment!) is testament to its popularity, proving its importance to blue chip retailers. Europe saw the technology as so vital to the online retail sector that Amazon were never able to get the patent granted here in the first place.
Now, with the patent expiring in 2017, a potentially huge opportunity is about to open up to US sellers.
Amazon have Garnered enough brand loyalty, and have built up market-leading methods of distribution, meaning the impact of the release of the patent might not be detrimental. However, that doesn’t mean that other retailers shouldn’t think about what one-click could do for their conversion rates on returning customers.
There are several interesting statistics that indicate how adoption of a one-click payment model could benefit US retailers. A comparison between US and UK markets across a sample of our retail clients in 2016 reveals that average order value was higher in the US (customers over there are spending more than UK customers on each converting visit) yet conversion rates were lower. In fact, between the four clients we analysed, the average order value in the US was nearly double that of the UK (£333 vs £198).
Meanwhile the UK conversion rate was 55% higher than in the US. This is something to bear in mind for UK retailers looking to take on the US market. As one-click makes it so easy for customers to not rethink purchases during multi-click hurdles, could this be a major contender in leveraging the higher AOVs being seen on the other side of the pond?
Moreover, the conversion rate seen in one US-based client for returning users is overwhelmingly superior to that of new users to site (1.23% for new users, 4.11% for returning users), even if the ratio of new vs returning users is 60:30. With such a high likelihood that returning users have least a consideration to convert, could it be that a one-click method of purchasing (or lack of) is a deciding factor for many users on the brink of purchase?
One report estimates that one-click increases Amazon’s sales by 5% each year. In 2011 Amazon turned over $48.1bn, which would mean that $2.4bn was generated thanks to the one-click payment model. Even scaled down to a more modest business size, the 5% revenue addition that one-click purportedly generates would still mean significant gains for any retailer looking to capitalise on returning user traffic.
It remains to be seen just how quickly retailers in the US market will take up the patent once it is out of Amazon’s grip. I think that the model’s value has been conveyed pretty well by the success it has brought to Amazon’s US offering, although to what extent consumers were returning to Amazon because of this feature is harder to determine. For businesses with loyal customers and good returning user counts, it would seem highly probable that the model could provide real value.
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