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Is Amazon's (AMZN) Dash Button a Game Changer?

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Tech giant Amazon (AMZN - Free Report) stock has gone up 2.3% as of 3:10 P.M. EDT on Tuesday after the company announced an expansion of its Dash Button program. The expansion adds another 50 new brands to the program, bringing the current to 150 different buttons, compared to only 29 last year.

What is the Dash Button Program?

The program, first announced by Amazon on March 31st, 2015, was initially questioned as an April fool’s prank. However, according to Amazon it has gained traction recently, with orders now taking place twice a minute, a rate double that of three months ago. Amazon also stated that total Dash button orders have grown 70% within that same timeframe.

The program is currently only for Amazon Prime members, and involves using little buttons that are connected to Wi-Fi and tied to a specific product. After a customer registers the button (which is generally done by phone), whenever they press it, an order will be put in for the product.

Current products range from household supplies and personal care products to beverage and grocery items.

Why is Amazon Doing This?

Amazon has received no shortage of questioning or doubt from its consumers, many of whom feel they don’t need a specific button for more niche products like Play-Doh or Slim Jims. However, it appears to be part of a bigger picture.

In January, TechCrunch reported on the first wave of Amazon DRS, or “Dash Replenishment Service” products. So far, these are household appliances that re-order supplies as they run out of them. Some examples of this would be a printer that automatically places an order for ink when it is running low, or a washing machine that dispenses the right amount of detergent and places an order before running out.

Amazon stated that they plan on making more devices Dash-enabled, but have otherwise kept a tight seal on their future plans with the technology.

Why Are People Using the Amazon Dash Button?

Amazon says that more people are using Amazon Dash, but the question is why? A simple Google search paints a different picture, with plenty of articles on the flaws of the Dash button, including selling consumers products at stock price, which often end up much more expensive than if they had simply browsed the site themselves and picked out a deal.

Amazon did release a programmable Dash button in May of this year, but it too has many complaints, including the fact that its battery life only lasts for 1000 clicks, and there’s no way to charge or replace it.

Not all people are using Dash buttons for their original purposes either. Some go off on their own and reprogram the buttons, for such purposes as tracking baby data or calling an Uber.

Although supporters of the Dash button laud its simplicity, others see it as a way to disconnect customers from how much money they are actually spending. Customers will have to wait and see what kind of usage data comes out in the future before definitively ruling out the button.

Bottom Line

Tech companies need to continue innovating in order to stay relevant, and Amazon is no different in their continued endeavor to differentiate themselves from competitors.

From what we have seen so far, I can’t say that I feel that Dash technology is a definite game changer. It certainly has plenty of potential, and while not without its faults I do believe it is still worth keeping an eye on moving forward.

Amazon currently sits at a Zacks Rank #2 (Buy).

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