Why Amazon is spending a fortune to put cameras in your homes

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The Amazon Go store isn't just reinventing retail; the company's recent acquisition streak indicates Amazon wants to reproduce its model of camera-fueled commerce in consumers' homes.

At first blush, Amazon's $1 billion acquisition of Ring, a company that makes "smart doorbells" that provide a video feed of the world outside, seems an obvious fit for Amazon Key, the boundary-pushing project that lets couriers into shoppers' homes. But if that's what Amazon wants, why not just stick with Blink, an almost identical company Amazon bought in December?

Or why even acquire these camera companies at all when Amazon has three camera-equipped Echo devices in its catalog already? The answer is less about product specifics and more about mindshare. Amazon can attribute the success of its Alexa assistant to its success in getting a smart speaker to market well ahead of formidable rivals like Apple, Google and Samsung. In the world of in-home cameras, Amazon already lost that race to Google, which purchased Nest in 2014 for $3.2 billion. Even if Google squandered the opportunity, it succeeded in keeping Nest's camera tech out of Amazon's hands.

Amazon's focus on Ring and Blink isn't its first step in taking over the home. The company's Dash system has given it ample data on how often consumers want to interact with it over the course of their home activities — whether that means pushing a button in the pantry to reorder coffee or letting the washing machine decide on its own to reorder detergent. Amazon even offers a Dash-branded bar code scanner to let customers scan items in their own kitchens when they run out; it's an idea that already feels outdated by the technology Amazon deploys in its Seattle Amazon Go store.

The one part of the home Amazon hasn't fully infiltrated is perhaps the most valuable.

"Amazon recognizes that access to the 'smart home' of the future is still going to be through the front door," said Michael Moeser, director of payments at Javelin Strategy & Research. "People want a single point of contact for a smart home. By giving Alexa the keys to the front, you essentially make it the first stop for everything."

Amazon did not return a request for comment on how Ring and its other investments could cross over. But there are several new payment scenarios beyond the delivery innovation that's apparent on the surface of the Ring deal.

Cameras play a vital role in the Amazon Go store design. Paired with a shopper's mobile app and other technology, they track which items shoppers pick up and put down as they fill up their bags. Some items have special codes on them that cameras can use to identify which product it is. Imagine if the same technology could be used at the front door, detecting when and how frequently a customer buys something like toilet paper, then offering to place an order when it senses supplies are running low. An interior surveillance camera could similarly detect when a consumer has consumed five out of six sodas and re-up their supply.

It's an intrusive concept — but that hasn't stopped Amazon before. The Blink and Ring cameras are already closely embedded with Amazon Key, a service that appeals only to people who are comfortable letting an Amazon courier into their homes.

"[Amazon] is using fulfillment verification to create new payment options," said Richard Crone, a payments consultant. Beyond simply verifying delivery of a product, Amazon could use Ring and Blink to trigger payment and other "cash on delivery" terms or "detention fees" for held items, Crone said.

The cameras could deploy in homes, stores and other facilities to add to multifactor authentication at different parts of the transaction, according to Crone. "The Ring acquisition extends the Amazon Go investment," he said.

As novel as Amazon Go seems today, it won't remain novel for long. Amazon is reportedly planning to add six more Go stores this year, and other companies are hot on its heels. AiFi just attracted $4 million to expand its no-cashier sensor-based concept, Walmart and Sam's Club are adding cashierless checkout, and Standard Cognition and NewStore are also building cashierless store models. Walmart is increasing its delivery options, along with other alternative options to pay for and receive groceries.

Amazon's Dash is also losing its luster. Samsung, Mastercard and FreshDirect have collaborated on a service that embeds Mastercard payments and FreshDirect ordering into Samsung's web-connected refrigerators, creating a home-based commerce hub in the kitchen.

Given Amazon's huge head start—it controls about 44% of the U.S. e-commerce market, according to eMarketer—any enhancement to its delivery and payment experience will only add to the pressure other retailers already feel to add more delivery service and technology.

Retailers have often considered their physical stores to be an edge over Amazon's almost purely digital strategy, but even that is fading. Last year, Amazon spent more than $13 billion to acquire Whole Foods even as Amazon was building a physical presence for its AmazonFresh grocery delivery service.

These innovations may seem different, or even at odds—automatically ordering an item at home means you don't have to go to the no-cashier store to buy it, or to Whole Foods. But there is an underlying thread, which is enabling a full shopping experience within reach at all times with very little friction and almost no required interaction. Amazon has long made investments in the "last mile," including Key and an earlier experiment with drone delivery, to make receiving goods as easy as its "single click" checkout.

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