Retail Domination

Amazon is Disrupting Retail. . . again

Google may be synonymous with online searches, but retail success story Amazon is synonymous with online spending. Beginning in 1994 as an online book store, the site has now become the world’s biggest internet-based retailer and the largest cloud infrastructure provider. According to a report by the Institute for Local Self-Reliance, significantly – half of all online searches begin directly with Amazon. Half of all U.S. households are subscribed to Amazon Prime, and on top of this, one out of every two dollars that Americans spend online goes to Amazon. This monopoly might be great news for Amazon, but it’s a huge problem for almost every other retailer. . .  and as if hoarding half of all online retail custom wasn’t enough, Amazon are on the path to further retail domination with the introduction of the shopping experience of the future – a store which has no tills or cashiers. Amazon are disrupting the world of retail. . . again.

Retail domination
Amazon’s new venture is called Amazon Go, and is a cut above self-service checkouts. The concept, which involves automatically adding items to a digital cart whilst the shopper browses the shelves, is currently being trialled in Seattle. The 1,800-square foot store basically sells food, including ready-to-eat, chef-crafted options to suit the target market of busy urbanites. All you need is a smartphone, an Amazon account and the free app which logs the groceries. According to the company, plans for a queue-less, cashier-less store have been in the pipeline for years. Already available to Amazon employees, the doors will open to the public in early 2017. The question is, why has the company decided to implement these stores? What are their objectives? and, why now?

Whilst Amazon is hugely successful, its Amazon Fresh grocery delivery service is relatively new. By adding digital convenience to traditional grocery shopping, the company is taking its competition with established grocers to another level. Apply the concept to a wider product range, and things get very interesting. It looks as if the new store could be acting as proof of concept for future plans, involving licensing out the technology to other retailers, making Amazon even more influential. On the other hand, Amazon (like everybody else) is obsessed with data, so the stores will no doubt have utility in themselves as well as existing as part of a bigger game plan. It’s no coincidence that the stores are so small – they’re designed for busy urban centres, easy to set up and easy to navigate.

How will Amazon Go disrupt retail?
Amazon Go has the potential to completely change retail as we know it, by merging digital and real world shopping experiences. Being able to check out an item in store but still retain the convenience of an online shopping basket is a game changer for the industry, and could hail the end of physical shops in their present format. Amazon Go will disrupt sales by addressing perhaps the main problem with online shopping – customers don’t get to see or try out products they buy online until they’re actually delivered. Other retailers will recognise the utility in offering the Amazon Go concept as a solution to this. For instance, if you were buying a suit for an important meeting, you probably wouldn’t get it from eBay – you’d want it to fit properly, and be made from good quality material. If a clothing company, for instance, could apply Amazon’s concept to their products, they would catch the laggards of online retail by offering the best of both worlds – digital convenience and real world assurance. This is great for busy consumers, who want to make sure they’re buying quality products without having to physically carry them through a store and back home. However, there’s an obvious employment angle here – if you take away tills, you take away cashiers, which massively impacts jobs. A large proportion of checkout workers were always bound to be displaced due to automation, and Amazon Go will only accelerate this. Even if Amazon’s flagship store in Seattle isn’t part of an ambitious B2B strategy, it will challenge existing, traditional grocers none-the-less.

Potential barriers. . .
It’s true that Amazon Go will threaten other stores, but it won’t be easy for the tech company to subvert customers from well-established grocery companies. Some shoppers may question the need to visit a store when they could simply order their favourite products online from a well-known brand. Political changes may also affect the new store, as throughout his presidential campaign, Donald Trump repeatedly stated that Amazon had too much power. Without government support, Amazon’s monopoly could suffer. Amazon could even face monopoly restrictions imposed by governing organisations, including the possibility of breaking up a company to stop domination. This is an extreme measure which was almost carried out against Microsoft, but was eventually dropped. However, Amazon is sailing in dangerous waters and has no apparent plans to slow its growth.

Amazon has become a serial disruptor in the retail world, emerging as the godfather of online sales with a shocking monopoly. Amazon Go is just another way in which the company is following a policy of aggressive expansion, joining the list of services which is continuing to pose a challenge to almost all other companies. At the moment, it looks as if Amazon will force competitors to take an, ‘if you can’t beat them, join them’ approach. . . but that of course depends on whether the venture is a success. If their plans to create more small prototypes, new drive-throughs and supermarket-sized stores are anything to go by, then they’re certainly confident that it will be.

Is Amazon Go part of a bigger B2B game plan? What other barriers could challenge Amazon’s expansion? Should they leave the groceries to the grocers? Share your thoughts and opinions.