Amazon's Record Device Sales Are Bad News for All Other Retailers

Amazon not only won the holiday shopping season -- the company set itself up for success for years to come. Though the online retailer has not released any data about its total sales for the Thanksgiving week shopping period,Slice Intelligence, which tracks digital receipts, told TechCrunch that dominated Black Friday sales, accounting for 35.7% of total sales that day.

A record $4.45 billion was expected to be spent online between Thanksgiving and Black Friday, according to research fromAdobe,with about $2.72 billion coming on Black Friday, 14% more than 2014. If both numbers are true, it means that the digital-sales leader sold about $971 million in that single day. If you extrapolate further, the technology company predicted$11 billion in online sales during the period between Thanksgiving and Cyber Monday.

If Amazon captured even a third of that, the retailer would have about $3.6 billion in sales in a five-day period. Those numbers are stunning, and of course, very good for Amazon; but they may not be as good for the retailer as what the hot sellers were.

Amazon increases its edgeOne of the key advantages Amazon has over other retailers is that it has more than 200 million credit cards on file. That makes it easy for people to order with the retailer with just a few clicks, and it may stop them from shopping elsewhere, where they would have to enter their personal and credit card information anew.

Part of the logic behind Amazon offering its own line of tablets, e-readers, streaming TV boxes, and home-control/music consumption device Echo, is that owning one (or more) of these devices strengthens the buyer's ties with the company. If a customer who is not a Prime member buys a Fire Tablet or TV, most specifically, he or she has the added incentive of Amazon's Prime Video service to entice them into the company's $99 a year service.

Fire TV Source: Amazon.

That's very important because an oft-cited survey from RBCCapital Markets shows that Prime members spend more money with the online retailer, GeekWire reported. The report showed that about 15% of non-Prime members spend more than $800 a year with compared to 40% of Prime members in their first year of membership, and 70% after four years as members.

Even if customers who buy Amazon's devices don't join the $99-a-year service, which offers free shipping, they still have effectively agreed to put mini stores in their homes. Every new device Amazon sold during the holiday period is a tiny beachhead that keeps customers away from retail rivals, includingTarget and Wal-Mart .

Amazon sold a lot of devicesFor, this holiday season may be the gift that keeps on giving. The company, which is very tight with device-specific sales data, issued a press release after Cyber Monday crowing about sales of its devices.

It said Fire TV was the top-selling streaming media player across all retailers, with sales on its own digital platforms being up six times year over year. The company also claimed that it sold "millions of 7 fire tablets," saying that the now $49.99 device, which it sold during the Black Friday period for $35, was up more than three times its 2014 numbers.

The online sales leader also claimed that its wireless speaker/home control/digital voice assistant Echo was the best-seller across all devices costing more than $100 on Black Friday. And just to rub it in a little bit to its rivals, Amazon noted that, not only was Fire its top-seller on during Black Friday, but Fire TV Stick came in second.

Amazon did not give specific numbers, but it's safe to say there are now millions of new people with devices tied directly to Amazon's sales platform. Those are customers who are very likely to input a credit card, at the least, or join Prime. That gives the online retailer a big edge when it comes to generating future sales over other retailers.

How does this work?Obviously, anyone using a Kindle device is likely to buy/rent movies, television shows, apps, and other downloadable content through Amazon. It's silly to think that someone who owns a streaming media box or tablet would consume content in any other way, which will further bury the already declining physical-video business at stores, including Wal-Mart and Target.

The advantage of placing its devices in people's homes goes ever further than that. Fire TV also has integrated e-commerce, where users can buy items directly on the device, and Amazon has plans to launch a live shopping "channel" for its streaming devices in early 2016. In addition, Echo users can verbally purchase items, or add them to a shopping list.

Shopping has increasingly moved into the digital realm and Wal-Mart and Target have invested heavily in their websites and apps, but they have no answer for Amazon's suite of products. Digital entertainment content is just the tip of the iceberg. Fire TV, Kindle tablets, and Echo should serve as Amazon's entree into all types of buying.

It's possible using the Alexa voice assistant on Echo to simply say, "Alexa, order me some Tide," and the dish-washing liquid is added to your shopping list. Similar technology is inevitable on the company's streaming boxes and tablets. That will bring sales to and take them away from brick and mortar stores -- even ones with solid web presences.

Why would anyone drive out to a Wal-Mart or a Target to buy toilet paper or shampoo unless they are completely out when Amazon will bring it to their door? Amazon's device penetration will put shopping a simple voice command away for most people. It may be in its infancy now, but it's clearly going to happen.

That puts a mini Amazon "store" in every home with a Kindle, Fire TV, or Echo which will ultimately leech sales from Target, Wal-Mart, and other retailers that have no direct answer to this type of in-house penetration.

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Daniel Kline has no position in any stocks mentioned. He owns an Echo, multiple Fire TVs, and at least three Kindle devices.The Motley Fool owns shares of and recommends The Motley Fool recommends Adobe Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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