One of the big promises for Internet of Things (IoT) devices is that not only will they be able to communicate repair needs, they should be able to participate in solving their own problems.

This already exists in high-end commercial devices. There are expensive medical machines that can not only order their own service calls, but tell the technicians what items they will need to bring with them. Think an X-Ray machine that knows when it's about to go out of service using its Internet connection to alert the hospital's scheduling and repair departments.

It sounds simple, but it's a technology that can cut down time, lower repair costs, and bring real value to the item's owner. This isn't IoT as a gimmick, it's a practical application of the technology that for now has mostly only been offered on machinery which costs hundreds of thousands of dollars.

Amazon (NASDAQ:AMZN) however has been inching closer to making devices that can auto replenish their own supplies and the company appears closer to bringing that technology to your home.

What is the retailer doing?
Amazon has already danced around the edge of this idea with its Dash buttons. The simple devices are Wi-Fi-enabled, allowing customers to place them next to where the item they represent is used, The Tide Dash button, for example, can be placed in the laundry room. When the user is running low on the item in question, he or she simply pushes it and orders more on Amazon.com. 

Amazon Dash button Source: Amazon 

The retailer explained how it works on its website:

Dash Button is simple to set up. Use the Amazon App on your smartphone to easily connect to your home Wi-Fi network and select the product you want to reorder with Dash Button. Once connected, a single press automatically places your order. Amazon sends a notification to your phone confirming your order. Unless you elect otherwise, Dash Button responds only to your first press until your order is delivered.

It seems simple and it is, but the Dash button gives Amazon an edge over its rivals. In theory a customer might simply elect to buy more Tide when he or she happens to be in Target (NYSE:TGT), Wal-Mart (NYSE:WMT), or a grocery store. The Dash button automates the process while removing the possibility that the customer might shop elsewhere.

Call it a low-level IoT application, but Amazon appears ready to further distance itself from Target and Wal-Mart (it's main retail competitors) by taking things a step further. The online retailer has been beta testing a program which would eliminate the need for a person to push the button. Instead, the devices themselves would reorder, and of course, they would do it from Amazon, not Target, Wal-Mart or any other retailer.

How will that work?
Amazon has quietly been working on a program to bring IoT order and automatic replenishment into common household devices. Imagine a water filter that not only know when it needs to be replaced but orders its own replacement or a washing machine that makes sure you never run out of detergent.

The company explained how the program works on its website: 

Amazon Dash Replenishment Service (DRS) enables connected devices to order physical goods from Amazon when supplies are running low -- like a Brita Water Pitcher that orders more filters. By using DRS, device makers are able to leverage Amazon's authentication and payment systems, customer service, and fulfillment network -- giving their customers access to Amazon's low prices, great selection, and reliable delivery.

It's a process that adds convenience, takes humans out of it, and locks device owners into Amazon.com. The retailer sees huge potential for DRS. 

"That could be anything," Rausch said, speaking with GeekWire after he took the stage at the Smart Kitchen Summit in Seattle. "That could be a folding lawn chair that orders beer from Prime Now. Who knows where it will stop."

It opens up a big, new world
By being ahead of the curve here Amazon has found another way to offer value for consumers and lock out its competitors. DRS is only in the beta stage, but the company shows an impressive variety of partners on its website. The company is also making it very easy for vendors to add the technology to new and existing products:

DRS can be integrated with devices in two ways. Device makers can either build a physical button into their hardware to reorder consumables or they can measure consumable usage so that reordering happens automatically.

For example, an automatic pet food dispenser made with built-in sensors can measure the amount of pet food remaining in its container and place an order before running out. Device makers can start using DRS with as few as 10 lines of code.

This is the future and Amazon has seized it. Target and Wal-Mart will, of course, attempt to catch up at some point, but once a consumer purchases a product with this technology built-in, he or she would have very little reason to change -- especially if it's an appliance like a washing machine which only gets replaced perhaps once a decade.

Amazon has done an excellent job here creating something that is truly useful for consumers which also benefits the company and its shareholders. Selling a DRS-equipped device is essentially placing a small annuity into a consumer's home. It's a gift that will keep on giving which will lead to measurable and predictable future sales.

 

 

Daniel Kline has no position in any stocks mentioned. He wished his coffee machine was a little closer to sentient. The Motley Fool owns shares of and recommends Amazon.com. 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.