Amazon's in-car deliveries have a whiff of desperation

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Amazon's increasingly weird ideas for getting products to Prime customers — grocery delivery, in-home delivery and now in-car delivery — point to an unsettling conclusion: Amazon, for all its market dominance, is pushing the limits of who it can reach with traditional package delivery.

Amazon Prime's U.S. growth has stagnated, and the e-commerce giant is spending billions of dollars on revenue enhancements such as international logistics and technology that accesses consumers' private property when they aren't home.

Prime (Amazon's paid service for two-day shipping, video streaming and many other perks) is hitting a wall—Morgan Stanley says Amazon Prime is plateauing with membership at 40% of U.S. adults remaining steady over the past year. And Piper Jaffray reported 82% of American households with incomes greater than $112,000 are already Amazon Prime members.

Until recently, most of Amazon's expansions have taken for granted that users would be comfortable getting packages left at their doors. Concepts such as washing machines that can reorder their own detergent, a Dash Wand for scanning bar codes in the kitchen, and Alexa-only deals all have the same endgame: A brown box delivered by traditional couriers.

The in-car delivery system seems like a compromise between the old model and the privacy-straining Amazon Key, which invites couriers to drop off packages in the shopper's home. Amazon is collaborating with General Motors and Volvo to allow keyless access to car trunks for couriers. There's a security play, since auto and home delivery technology avoid the risk of leaving packages unattended outside — but the in-car option doesn't provide access to anything more than what's in a shopper's trunk.

These moves also come against a backdrop of Prime, which does not have a lot of room to organically add new members in the U.S., which is Amazon's most successful market. Amazon hopes to take advantage of its U.S. dominance, where it controls about half of the e-commerce market. As Amazon Prime matures in market penetration, the company is looking for ways to encourage more frequent usage. As far afield as in-car delivery may seem, introducing the concept of cars as commerce devices opens a new channel for Amazon Prime.

That feeds an eventual expansion into in-car shopping, an opportunity that also attracted the card networks, which are looking for a pre-emptive presence in the expanding connected car market.

GM has more than 12 million connected cars, and will make the Amazon delivery option available for about 7 million cars, with all of its major U.S. brands from 2015 onward supported. All Volvos from 2012 onward can support the delivery service.

By entering parked cars, Amazon can follow its development of voice activated payments and further address the "multitasking market," in which consumers are shopping and paying while doing something else, according to Richard Crone, a payments consultant.

"The average car is parked 95% of the time," Crone said, estimating Amazon could triple its end points by making parked cars an e-commerce venue. "It is tapping a huge market...not just home but work, the gym, parents' house ... wherever you predictably park."

The concept isn't new, Crone said, adding there are already fuel delivery apps for cars in Silicon Valley.

And the technology for locating parked cars isn't new, Crone noted. "Google has been doing this for a long time with Google Maps," he said, adding it's a source of additional data that can feed payment features. "Google and Apple have apps that tell you where you have parked. That also means they know."

Amazon is aggressively trying to expand outside of the U.S. to grow Prime, but that won't be easy. Amazon is spending billions to gain a foothold in India and Asia, though it faces major competition from Alibaba and Tencent, which control the e-commerce market in those regions. Amazon has also invested heavily in infrastructure and warehouses to boost Prime delivery in Europe—$550 million in Italy alone. But European e-commerce is a relatively small part of Amazon's overall business, and is actually a money-loser for the company.

Amazon has additionally turned turn to brick and mortar, using its Whole Foods acquisition to boost Prime. Amazon spent more than $13 billion to acquire Whole Foods, and is folding Whole Foods incentive marketing into Amazon Prime with discounts for Prime members.

Amazon provided an email statement that described the auto delivery service, but did not comment further. In public statements, Amazon has painted a positive picture of Prime's growth. After years of not releasing adoption stats for Prime, Amazon recently reported it signed up more new prime members in 2017 than any other prior year and said it has crossed the 100 million mark in global membership for the first time. And subscription fees alone add more than $18 billion to Amazon's top line, though none of these numbers directly address Amazon's core U.S. market and are media estimates that include other Amazon products.

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