Amazon May Have a New Way to Attract Customers

Its reputation as a disruptor precedes it and tends to sow panic among the players in any sector in which it is interested. 

Amazon has completely changed the way we shop. The e-commerce giant, founded by Jeff Bezos, has revolutionized the retail business, establishing online shopping as the new norm for consumers. In doing so, the Seattle, Wash.-based group, caused the disappearance of many chain stores and the closure of many small businesses. To survive, traditional retail chains have had to set up online platforms as well. 

But the e-commerce company has also been overtaken by behemoths like Walmart  (WMT) - Get Free Report, which are currently fighting a merciless battle against it. This fight is played out, in particular, on the services offered to customers in order to build their loyalty. Amazon's weapon is Prime, a subscription service which costs $139 a year in the United States. In exchange, subscribers have many privileges such as fast and free standard delivery of their shopping, access to streaming video and access to a catalog of 100 million songs. 

No Deal Is Imminent

These perks have boosted subscriptions, so nearly 167 million people shopping on Amazon  (AMZN) - Get Free Report are Prime subscribers. But subscriptions have stagnated since the recent rise in subscription prices, which came as the economy began to slow down under the effect of inflation at its highest levels in several decades.

There is also the fact that Walmart offers an equivalent service, Walmart+, which costs just $98 a year. Subscribers to this service are also entitled to free delivery of their grocery orders of at least $35. At Amazon, to have these grocery orders delivered for free, you must have spent at least $150. It is therefore logical that for consumers, the Walmart offer is more attractive. But Amazon is working on a product that could turn out to be a game changer for Prime. The firm headed by CEO Andy Jassy is in negotiations with several telephone operators to offer mobile telephone services to U.S. Prime subscribers, according to Bloomberg News.

Those talks began eight weeks ago and are ongoing, reports the news outlet, and involve Verizon Communications  (VZ) - Get Free Report, T-Mobile US and Dish Network  (DISH) - Get Free Report. There have also been discussions with AT&T  (T) - Get Free Report, Bloomberg News said. No deal is imminent, but the outline of the negotiations indicates that Amazon wants to offer either free wireless to Prime subscribers or offer them a $10 package.

"We are always exploring adding even more benefits for Prime members, but don’t have plans to add wireless at this time," Bradley Mattinger, an Amazon spokesperson, said in a statement.

It is the "at this time," that suggests that the e-commerce giant does not rule out the possibility of offering mobile phone services, possibly in the near future.

Amazon could also decide to abandon this project. But an entry into the wireless sector would be logical for Amazon, which has set its sights on entering the Internet sector with Project Kuiper, a satellite Internet access service.

"Kuiper is another example of Amazon innovating for customers over the long term in an area where there’s a high customer need,” Jassy said on April 13. "Our vision for Kuiper is to create a low-Earth orbit satellite system to deliver high-quality broadband internet service to places around the world that don’t currently have it.”

Amazon Could Become an MVNO

There are hundreds of millions of households and businesses that don’t have reliable access to the Internet, he argued.

"Imagine what they’ll be able to do with reliable connectivity, from people taking online education courses, using financial services, starting their own businesses, doing their shopping, enjoying entertainment, to businesses and governments improving their coverage, efficiency, and operations,” Jassy continued.

Jassy also stressed that Kuiper will not only be accessible but affordable.

"Our teams have developed low-cost antennas (i.e. customer terminals) that will lower the barriers to access,” he said. “We recently unveiled the new terminals that will communicate with the satellites passing overhead, and we expect to be able to produce our standard residential version for less than $400 each.”

It is important to note, however, that Amazon's attempt to enter the wireless sector by offering Fire Phone in 2014 to compete with Apple was a big failure. The firm abandoned the project a year later. This time, Amazon sees itself as a mobile virtual network operator or MVNO, Bloomberg News reported.

A mobile virtual network operator designates a telecom operator which has the particularity of not having its own network or infrastructure. To provide its services to its customers, it executes a contract with one of the traditional players in mobile telephony. The signing of such an agreement with these traditional operators allows their network to be used by the MVNO.

If Amazon manages to forge an agreement with a traditional operator, it could disrupt the sector where the plans are prohibitive compared to other Western countries. Unlimited plans start at $60 a month at Verizon and T-Mobile and at $65 a month at AT&T.