When Amazon launched a little over 20 years ago, it might have been easy to write off as a footnote in internet history in the making: the little Seattle company that tried to sell books on the internet. But over the past two decades — while many other ideas washed up on the rocks of attempted internet commerce gone awry — Amazon has more or less made like a mustard seed and grown a large tree from a tiny speck.
A very large tree that now also does logistics, eCommerce, hardware, voice-activated AI, web services, video/music streaming, payments, grocery and drones. Recent actions indicate physical commerce is coming soon to that list — and reporting in The New York Times last week indicates that Amazon is eying a very big play.
A not entirely surprising bit of reportage about a firm whose CEO coined the phrase “get big fast.”
But the retail vision, if accurately outlined, is certainly pretty comprehensive — and potentially quite alarming to the brick-and-mortar players out there that are already feeling the sting of Amazon’s ever-expanding ambitions.
The Big Idea
That Amazon is the dominant force in American online commerce isn’t really a proposition up for debate, one that can be measured in the percentage of digital sales it commands, the size and scope of its marketplace, or the number of Prime members in the U.S. (not to mention around the world). “Amazon” has basically become every struggling retailer’s favorite answer to the question, what went wrong?
And that was just Amazon online — Amazon in the real world, in real time and possibly rearranging the world of physical retail entirely is a horse of a different color.
Though what exact shade remains somewhat up in the air. According to “several people with knowledge of the discussions who spoke [to The New York Times] on condition of anonymity because the plans were confidential,” it looks like Amazon has plans for a “fleet” of physical stores.
Ideas floated in the article include furniture and home appliances emporiums that could function as showcases for the types of large items consumers like to see in person. Consumers buy them in-store, and the goods are delivered (the same day) to their homes. There was also some speculation about adding technological enhancements like augmented reality devices so consumer can see not just a couch — but how a couch will actually look in their living room.
Also in play is the Amazon electronics store, described as something of an Apple store redux with a heavy emphasis on devices like the Echo and Kindle — or services like Prime streaming.
The Ongoing Grocery Struggle
Amazon is it seems doubling down on its grocery efforts thus far, which have had mixed results.
And in groceries — a giant category in which Amazon has struggled — the company has opened a convenience store that does not need cashiers, and it is close to opening two stores where drivers can quickly pick up groceries without leaving their cars, both in Seattle. It has explored another grocery store concept that could serve walk-in customers and act as a hub for home deliveries.
Grocery remains a category where consumers seem rather dedicated to buying in person, particularly when it comes to meats and fresh produce. Online grocery delivery only accounts for about 3 percent of the market in the U.S today. Plus, grocery delivery is an expensive option — Amazon users pay an additional $15 a month for the service on top of the $99 they pay for regular Prime membership.
According to the Times sources, the service has struggled to operate it profitably, leading to a slow rollout of the service in new locations.
But given the $770 billion value on the category, Amazon is not walking away, either.
Today Amazon announced its first two grocery pickup locations. For now, the AmazonFresh Pickup locations are in beta testing and open exclusively to Amazon employees. But once they’re open to the general public, consumers will be able to order groceries online and retrieve them up from pickup locations. There are also some rumors Amazon is experimenting with technology for automatically detecting when a customer pulls into the parking lot so that orders can be brought to customers more quickly.
That is an interesting play — though not entirely new, Walmart and Kroger both have similar click-and-connect programs — and Amazon very famously doesn’t want to play follow the leader.
“We want to do something uniquely Amazon,” Jeff Bezos, the company’s chief executive, said in 2012. “If we can find that idea, and we haven’t found it yet, but if we can find that idea, we would love to open physical stores.”
More “uniquely Amazon” is the concept underlying its AmazonGo convenience store — and its rather Uberized shopping experience. As billed, the store is designed using a combination of sensor and AI to detect what items shoppers are buying and to automatically settle payment for said items in the cloud. No stop at a cashier station needed.
And that lack makes a lot watchers nervous — noting that Amazon’s high-tech store of the future may include very few human workers. Some speculated that Amazon is trying to build a grocery store that run with just three human employees — though that was speculation that Jeff Bezos shot down with the observation that the person who came up with that concept was “off their meds.”
What’s Really Next
Amazon-related speculation is always a good time, though of course reality intervenes in inconsistent ways. AmazonGo stores, for example, are coming soon, but not as soon as initially thought, since there are some technical bugs that still need to be ironed out with that groundbreaking “Just Walk Out” system.
And then there is the reality that Amazon has lots of ideas — its executives are very literally encouraged to come up with them. But they don’t do everything they think about.
“We are always thinking about new ways to serve customers, but thinking is different than planning,” said Drew Herdener, an Amazon spokesman.
And, notably, Amazon doesn’t stick with everything it plans — some ideas look much better on paper than they do in the wild (Fire phone, anyone?).
But as Amazon is nearing its fifth physical store opening — a bookstore in Chicago — it also seems that the physical world is about to be integrated into the Amazon ecosystem.
In a Matchmakers interview with PYMNTS last year, however, Amazon’s Vice President of External Payments Patrick Gauthier noted that Amazon has always been doing more or less the same thing: making things immediately available to customers and leveraging technology to shorten the distance between the time when someone wants something and when they get it.
Amazon doesn’t care what customers want — clothes, electronics, a personal assistant or a refrigerator — it wants to find a way to get it to that customer — preferably faster and in a more friction-free way than its competitors.
And if they can do that as well in the physical world as well as they have in the digital world — cashiers aren’t the only people who should be worried.