Amazon Just Gave You 500 Coins. Now What?

Amazon coins
If you own an Amazon Kindle Fire, then chances are, today you're 500 coins richer. Not $500 richer, mind you. Or 500 euros, yen, yuan or even bitcoins richer. (AMZN), you see, is starting its own virtual currency -- Amazon Coin -- and to kick-start the effort this week, it emailed registered owners of its Kindle Fire tablet informing them that they've each been credited with 500 of the new coins, to do with what they will.

The coins can be used to make electronic purchases of virtual goods at Amazon's app store. They will never expire. Nor does Amazon charge any fees for their use, or for maintaining a balance month-to-month, for example. So the coins are yours to use whenever you get around to it.

And when your e-wallet is empty, Amazon will happily sell you more at the going rate of a penny apiece. The company will even give you a discount on that price if you buy the coins in bulk.

Amazon's Gambit

Why the sudden act of generosity? Well, in a nutshell, this is Amazon's latest gambit aimed at securing customer loyalty, and convincing you to do your shopping on Amazon, rather than elsewhere.

Much like a Starbucks (SBUX) loyalty card or a prepaid debit card for Apple's (AAPL) app store -- or the Chuck E. Cheese (CEC) tokens our kids beg us to buy them for the arcade -- Amazon Coins can be spent at only one place: That basically locks users into patronizing Amazon with their coins. It's a use-it-or-lose-it currency.

Spending Coin to Pick Up Customers

Valued at a whopping penny apiece, the coins that Amazon gave away this week amount to all of $5 for each Kindle Fire owner -- so this is hardly a promotion that will break Amazon's bank.

According to the company, it's given away just a few "tens of millions of dollars" so far -- literal, if virtual, pocket change for a company that does $64 billion in sales annually. Thus, this is a pretty small gamble for Amazon to make on hopes of boosting customer loyalty, and potentially revenues.

These coins are a revenue driver for Amazon. By securing customers' coin purchases for its own app store, where customers buy items from third-party developers, Amazon boosts the number of transactions from which it takes a 30 percent cut. (When a customer buys an app, 70 percent goes to the app's seller, 30 percent to Amazon.)

One possible bonus for Amazon: Continual visits to its app store for coin shopping could have a "rub-off" effect on customers and boost sales of dollar-denominated goods. After all, if you're there already, why not pick up a few things on your shopping list?

Another potential bonus for Amazon is that it might spur a small round of belated Kindle Fire buying, as consumers who've sat on the tablet fence till now decide to buy a Fire rather than an iPad or Android device, in hopes of getting in on future promotions.

What's It Mean to You?

For you, the consumer, however, there's little reason to play Amazon's game and lock yourself into the Amazon ecosystem.

After all, you can still shop on Amazon with dollars, and a greenback will still buy you 100 coins' worth of apps at the Amazon app store. So why lock yourself into making your purchases there by buying Amazon's funny money?

Seriously, folks, statistically speaking, you've probably got six credit cards in your wallet, a couple of debit cards, electric bills, gas bills, a mortgage and the kids' college tuition to keep track of already. Do you really need to add "domestic currency transactions" -- and the conversion rate of coins to greenbacks -- to your financial to-do list?

I don't think so.

A better way to play this is to turn the tables on Amazon and beat them at their own game. Spend your initial 500 coins, sure. $5? Go wild.

But going forward, do your shopping in U.S. dollars. On the off chance that at some time in the future you need to make a big virtual purchase at the app store -- and Amazon delivers on its promise of selling bulk purchases of coins at a discount -- you can always buy a million coins ($10,000 worth) just before you need them, pay, let's say, $9,000 with a hypothetical discount, and spend them immediately.

Under that scenario, Amazon Coins really could help you to win the lottery. They just won't help Amazon much.

Motley Fool contributor Rich Smith owns shares of Apple. The Motley Fool recommends, Apple and Starbucks. The Motley Fool owns shares of, Apple and Starbucks.

17 Things You Should Always Buy New
See Gallery
Amazon Just Gave You 500 Coins. Now What?

When it comes to your safety, you should never shop secondhand. Minor scratches or dings in helmets that you might be unable to spot right away can cause their safety rating to fall.

 Buying tip: According to Bicycling Magazine, some of the best bike helmets include the Giro Atmos, Louis Garneau Quartz and Bontrager Oracle.

By Business Insider

Cribs can stand a lot of abuse from cranky toddlers, but you want to make sure your children aren't put in danger by a potentially damaged bed. According to The New York Times, issues with unsafe cribs led to 150 deaths between 2007 and 2010.

 Buying tip: Squidoo recently put together a list of the top ten baby cribs for 2013.

By Business Insider

Any small defect in a secondhand laptop will only get exacerbated over time. You also don't have the luxury of a warranty or customer service guarantee if you don't buy it new yourself.

 Buying tip: If you are looking to buy something on the cheaper side, most retailers offer refurbished products that are still covered by warranties. And major electronics stores like Best Buy offer steep discounts on display models. Call around to ask beforehand.

By Business Insider

Many websites advise against buying shoes used because they've probably already been formed to the foot of the person who wore them before you. Especially with running shoes, this could lead to discomfort or injuries.

 Buying tip: Duke Health recommends taking a good look at the sole and arch of your next pair of athletic shoes to make sure you get the best fit.


By Business Insider

Non-stick cookware especially is something you want to invest in on your own. The coatings break down over time, making them more difficult to clean and potentially releasing harmful chemicals.

 Buying tip: No matter what brand you buy, take extra care of your non-stick cookware to make sure it lasts. But be prepared to replace them every three to four years, on average.

By Business Insider

Hats can be difficult to clean, and that means the previous owner's lice and hair could still be lurking inside. Purchase your next baseball cap somewhere other than a garage sale.

 Buying tip: As with any product, Amazon has a list of the best-selling caps and hats.


By Business Insider

Blenders require their blades to be super sharp to be functioning at their best. If you buy one secondhand, it might take longer for the duller parts to puree the berries and bananas going into your smoothie.

 Buying tip: Good Housekeeping touts blender brands like these as some of the best.

By Business Insider

Bed bug risk aside, odors in upholstered furniture can be difficult to get out, no matter how much Febreze you use. If you buy furniture used, it might be best to reupholster it yourself.

 Buying tip: If you do buy used upholstery, make sure you hire an expert to do the cleaning. It's likely it will be worth the money.

By Business Insider

A tiny scratch on a used lens could wreck your next photo shoot. Lenses are a big investment, so it's probably wise to spend the money to ensure you're buying a quality product.

 Buying tip: Salon has a list of the best camera lenses for your buck.


By Business Insider

Never buy these - or bedding or pillowcases - secondhand. It's not worth it when you consider the risk of bedbugs and other molds or critters that could be lurking inside.

 Buying tip: recommends buying a mattress that has at least a 10-year warranty. And be sure to give it a test nap in the store for at least 10 minutes before buying.


By Business Insider

Besides the hygiene issues that come with a secondhand swimsuit, these garments tend to wear out very quickly. Your bikini won't do a good job covering you up if it starts to get saggy the first time it's hit by a wave.

 Buying tip: If you're looking to invest in a bathing suit that won't go out of style in one season, look at style guides like these to help you make a wise purchase.

By Business Insider

Wet suits need to fit well and they often wear out over time, making them less likely to keep you warm underwater. The suits aren't cheap, but don't risk getting chilly on your next scuba trip with a used one.

 Buying tip: has a list of 36 good wetsuit brands to help you find one that's best for your next aquatic adventure.


By Business Insider

Vacuums are one of the most-used appliances and they don't last forever. If you need something that still has the suction power to clean the dust around your whole house, it might be best to buy a new one yourself.

 Buying tip: If you do want to save money by buying used, make sure you test it beforehand and follow these other tips, too.


By Business Insider

Safety is a major player here, too. In the event of a crash, you don't want a potentially damaged car seat to put your child in danger.

 Buying tip: Consumer Reports has a great list of highly-rated car seats, depending on what style you're looking to buy.

By Business Insider

Buying tires used is never a good idea, since the tread could be worn and it may put your safety in danger. Tires wear out as they age, and it's best to buy them straight from the store.

 Buying tip: Popular Mechanics has a helpful article about what to look for the next time you're hunting for new tires.

By Business Insider

Software usually only has codes to be used on a limited number of computers, and there's a chance you could get ripped off if you buy a used copy. It's best to buy straight from the manufacturer to make sure you get a working version.

 Buying tip: If you're buying a piece of software for your whole family, you can often find a software subscription with enough codes to load it on everyone's laptop.

By Business Insider

This also applies to video cameras. Since you'll be using this to capture important life moments, you want to make sure you're not getting a faulty product.

 Buying tip: February is usually a good time to buy a new camera, since they often go on sale before new models come out around President's Day.

By Business Insider

Read Full Story