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The Amazon wake-up call

Whether or not Amazon Go actually works isn’t really the point. What’s at stake here is bricks and mortar retail itself.

A modified version of this article was originally published by Retail Technology.

You’re probably aware of Amazon Go, the planned fully automated grocery store without checkout operators. Customers will, they say, be able to walk in, put what they want into their bag, and walk right out. Machines will sense what they’ve taken, and they’ll pay automatically via a phone app.

Most people have reacted in one of two ways. Either it’s the most amazing thing ever and it’s set to change the face of retail. Or, as many believe, it won’t actually work, and it’s just Amazon’s typical annual hype. (Remember Prime Air, and how that was going to change everything? Three years later, and they’ve made just one successful drone delivery in the UK.)

But whether or not Amazon Go actually works isn’t really the point. What’s at stake here is bricks and mortar retail itself.

But whether or not Amazon Go actually works isn’t really the point. What’s at stake here is the future of bricks and mortar retail itself. For two decades, Amazon has confined itself to winning the online arena. They’ve ruthlessly and relentlessly taken customers from pretty much everyone, and they’ve already hammered traditional retailers hard, but so far they’ve stayed away from having actual physical stores. Amazon Go is an indicator that all that is about to change. Now they want it all.

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Survival

Businesses small and large have good reason to fear Amazon. Lucinda Cramsey, founder of several organic food businesses across the Eastern United States, is bracing herself for the onslaught. “It’s a competitive business, but there’s always been room for all of us,” she says. “Between local companies like ours, and big outfits like Whole Foods, there’s enough to go around. But when Amazon comes in and starts offering fresh produce, I don’t know how many of us will survive.”

When Amazon comes in and starts offering fresh produce, I don’t know how many of us will survive.

What differentiates Amazon from almost everyone else is that they’re always thinking out of the box and taking a long-term view. They’re not focused on next quarter’s revenues or even next year’s stock price. They’re planning for where they want to be five or ten years from now. They’re not interested in just doing what everyone else does, but doing it different, doing it better, and winning, whatever the cost.

They’re imagining whole new approaches to shopping, constantly thinking about better ways to engage customers, better ways to ensure their loyalty, and better ways to help customers get what they want. And they’re prepared to invest vast sums in new technology if that’s what it takes to make it happen. If there are a few failures along the way, they're ready to accept that. The successes will more than make up for it.

Innovations

Go is just the latest in a long line of innovations from Amazon. With Echo and Alexa, they’re looking at voice-enabled shopping. Dash buttons give customers one-click purchases of everyday items such as toilet paper or cat food. With Pantry, they’re getting into the grocery business. (Admittedly, grocery delivery has been going on in Europe for almost a decade, but American supermarkets have been resolutely ignoring the opportunity and refusing to follow suit. Now, they’re finding themselves forced into doing so because of Amazon’s lead.)

Prime offers free, fast delivery, streaming movies, and streaming music to loyal customers and their households - and they've proved that people will pay for it.

Kindle and Fire got them into the book and magazine publishing business, as well as the tablet market and their personalised recommendation algorithms increased customer’s likelihood of making a purchase even when they didn’t find what they wanted right away.

Their innovation isn’t just confined to technology: their customer service has set the standard for everyone else.

Their warehousing technology allows them to ship goods faster than anyone else, and at a lower cost. And their innovation isn’t just confined to technology: their customer service has set the standard for everyone else.

But most importantly, Amazon has realised they don’t need to do everything. They just need to be the preferred intermediaries. Whatever a customer wants to buy online, Amazon can supply it, cheaper, faster, and easier. In order to reach enough customers, small and medium retailers across the world are signing up to be Amazon vendors. But while those businesses depend on Amazon for their livelihood, it’s a one-sided relationship.

Amazon has realised they don’t need to do everything. They just need to be the preferred intermediaries.

Amazon controls the portal, the payment, and the entire customer experience, and they really don’t care which of the many vendors their customer chooses. It’s of no concern to them whether you go under or whether you survive: whatever happens, Amazon wins.

Challenge

This is the real danger of Amazon Go. They don’t have to open Go stores everywhere to win this game. Five years from now, they’ll own the technology for fully automated shops, including seamless payment apps, and it’ll be fully tested. They’ll have all the data to show how it can save money, and they’ll have a solid understanding of the processes for implementing and operating it.

And then they’ll license it to everyone else. Either you pay Amazon to use their technology, or you’ll be stuck with clunky, old-fashioned, expensive checkouts.

The challenge facing retailers is stark. Carry on as normal, and you risk finding that your customers are deserting you for cheaper, easier, Amazon-powered alternatives, both online and in-store. When that happens, you’ll end up having to take whatever deal they offer. Pay their percentage, or go under.

The only alternative if you want to retain your long-term independence is to develop your own technology.

The only alternative that makes sense if you want to retain your long-term independence is to develop your own technology, create your own portals, and set your own direction. Create a superb, unique customer experience, in-store and online, that makes them want to do business with you rather than Amazon. Embrace web, mobile, and emerging technologies that are only just being explored. Don’t count on your brand and reputation alone to see you through.

Amazon Go is the wake-up call for bricks and mortar retailers. You may have ignored them for years, but Amazon are now your direct competitors on the streets. Act now, or you’ll lose the battle for in-store customers before you’ve even realised it’s begun.

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