When talking about the huge disruption that is taking place in retail markets today, Amazon is often singled out as the culprit.
Many point to Amazon’s huge scale – it now offers hundreds of millions of products – and ability and willingness to compete aggressively on price as the reasons it has been so successful in winning over consumers.
But Amazon’s success isn’t simply the result of the company’s scale and pricing power. In a growing number of markets, it’s becoming clear that Amazon is managing to fundamentally reshape customer experiences. As customers come to like those experiences, it alters their expectations of how they want to shop, putting pressure on Amazon’s competitors.
Interestingly, despite the huge impact it has already made on retail, there’s the possibility that Amazon is just getting started, as the company still has significant opportunities to grow its position in some of retail’s most lucrative markets.
Groceries: Amazon’s biggest opportunity yet?
With annual revenues exceeding $600 billion in the U.S. alone, grocery retail offers perhaps Amazon’s biggest opportunity for growth, which explains why the company has been making so many moves, and big moves, to become a larger player in the space.
In 2008, Amazon officially launched AmazonFresh, a home grocery delivery service available to Prime members for $14.99 per month. It is now available in a number of major U.S. cities as well as a handful of others globally.
Earlier this year, Amazon launched two AmazonFresh Pickup locations in Seattle. These allow customers to order grocery items on time, schedule a pickup time and have the items loaded into their cars. According to Amazon, “Orders can be ready in as little as 15 minutes after they are placed.”
But Amazon’s grocery ambitions are much bigger than AmazonFresh and AmazonFresh Pickup.
Late last year, Amazon opened Amazon Go, a partially-automated prototype grocery store in Seattle.
As Haomiao Huang, CTO of smart home security services company Kuna suggested, Amazon Go could pave the way for “‘just walk out’ groceries.” In it, he explained how the advanced technologies Amazon is experimenting with, including computer vision, neural networks and sensor fusion, could allow Amazon to create a grocery shopping experience unlike anything ever before seen – one in which customers walk into a store, select their items and leave, all without ever having to stand in a checkout line.
Huang also made an interesting observation:
“…at its core, Amazon Go clearly seems like a product of the same fundamental advances in artificial intelligence, computer vision, and automated decision-making that are behind AlphaGo and the sudden explosion of self-driving cars.”
While it could take perhaps another year or two for Amazon’s vision to come into focus, it might soon have a huge platform on which to execute that vision: earlier this month, Amazon announced a near-$14 billion bid to acquire upscale grocery chain Whole Foods.
The acquisition, if consummated, would make Amazon to the fifth largest grocery retailer in the U.S. and give it the ability to bring its grocery shopping innovations to the market much more rapidly.
And once again, that could wind up changing a massive market in a big way. For example, some observers are already suggesting that despite the fact Whole Foods is an up-market brand, Amazon will aggressively look to cut prices, which could in turn lead to the decline of coupons in grocery retail.
While the grocery market is one of the most lucrative Amazon is trying to crack, the retail giant’s desire to reshape the customer experience (and profit from it) extends to many markets. For example, another huge market, apparel, is also one in which Amazon is making moves to reshape the customer experience.
In April, Amazon unveiled the Amazon Echo Look, a new voice-driven intelligent assistant device. It comes equipped with a camera that is intended to be used to take wardrobe photos that can be compiled into Look Books. In addition, the Echo Look is integrated with Amazon Style Check, which uses machine learning and human feedback to help individuals decide which outfits to wear.
And then, this month, Amazon launched into beta Prime Wardrobe, a wardrobe subscription box service with a few twists. First, all shipments come in a resealable box with a prepaid label, making it easier for customers to send back returns. To incentivize customers to keep more items and reward them when they do, Amazon will offer Prime Wardrobe customers a 20% discount on an order when they keep five or more items from a shipment. If they keep three or more items, they’ll receive a 10% discount.
Prime Wardrobe will be available at no additional cost to Prime subscribers.
The Amazon Way
In looking at both groceries and apparel, The Amazon Way is apparent: use technology to improve customer experience, build on existing scale and find platforms on which to scale further using that technology, and employ clever business strategies and techniques to incentivize customers to adopt new behaviors.
In short, Amazon has developed a recipe that it can apply to change the way consumers want to shop. As it does so, it not only reshapes retail markets; it quite literally changes the future.