Amazon.com (NASDAQ: AMZN) took out its wallet again this week, plunking down more than a reported $1 billion to buy Ring, a maker of smart doorbells. With the move, Amazon is taking another step into the smart-home market and making it easier for customers to order goods online, driving its e-commerce growth.
Ring is a six-year-old company, but it offers a range of Wi-Fi connected home security devices, including doorbells and cameras, and says its mission is to reduce crime in neighborhoods by stopping things like break-ins and package thefts before they happen. Considering that package theft is one of the biggest challenges to home delivery for Amazon, it's not surprising that the company sees value in the start-up.
It's also Amazon's latest move in a series of innovations and acquisitions that have consistently driven the company's growth and expanded its market opportunity.
The 24-hour everything store
Amazon began life as a humble online bookseller and was one of a few online retailers to survive the dot-com bubble. From there, the company expanded its empire by widening its selection and speeding up delivery as it built warehouses on the outskirts of cities across the country. Prime, its most important innovation, has attracted tens of millions of shoppers to its site by offering free two-day shipping -- along with a smorgasbord of other benefits -- for just $99 per year. The loyalty program has been so popular that it has forced brick-and-mortar competitors to play catch-up, as Walmart did last year when it began offering free two-day shipping on orders over $35 without a membership fee. But it's not just Prime that has helped Amazon gradually make online shopping the norm. It's part of a broader approach to make it better, easier, cheaper, and more convenient.
Many of its inventions come with that in mind. For instance, the Fire tablet, which the company sold at cost, was a way to give consumers a handheld device for consuming Amazon media and shopping on the website. Amazon's Alexa-powered gadgets have a similar design, enabling voice-ordering or listening to Amazon Music, among other features.
Amazon has also introduced things like Amazon Lockers to enable delivery for customers who can't easily receive packages at their homes; Home Services to provide TV installation and furniture assembly; and grocery delivery through AmazonFresh, which was recently rolled into Prime Now with its Whole Foods acquisition. Acquisitions like Kiva Systems, Zappos, and Quidsi have also helped pave the way.
But the innovation that Ring is most set to complement is the Amazon Key, a product Amazon just introduced last October that allows keyless entry for guest access and in-home delivery for $249.99. Since there is considerable overlap between the two, Amazon could fold the technology from one into the other in a rebrand of Ring.
Walmart has also forged its own partnership with a smart lockmaker, as keyless entry may be the next front in the e-commerce wars.
Why Amazon (and e-commerce) will keep growing
Online sales in the U.S. have grown annually by about 15% since the financial crisis, largely because of Amazon's efforts to make e-commerce more attractive. Still, only about 9% of American retail sales take place online, so the opportunity for Amazon and e-commerce to take market share from traditional retail is huge.
With its acquisition of Ring, Amazon is making it even easier for its shoppers to gain control and security over how and when their orders are delivered, as well as whether they are brought inside the house or left on the doorstep. It's just one of many steps Amazon has made to bring in new customers and increase spending on its platform. As it continues to do so, its competitors will have to follow suit or fall behind. That aggressive approach will ensure that Amazon's strong growth rate continues.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.