While retail brands have acknowledged that its time for an omni-channel approach and we can now see Indian e-commerce brands building an offline presence, Amazon is finally ramping up the pressure on the likes of Walmart, Trader’s Joe and finally on Indian chains like Big Bazaar.
While Amazon Go or to be more precise, the idea of automation is here to stay, I think retail firms must first consider how they can implement or fight the model. It’s essential retail firms identify whether they stand for a savings or premium approach. By defining their brand and identity, retail chains can best figure how to take the fight to Amazon. At the same time, retail chains need to consider how to mitigate risks (shoplifting, fraud etc). The absence of a physical person also brings into question the ability of brands to create a better shopping experience by stepping in at crucial moments of the purchase process.
But first – Lets look at why Amazon is adopting the offline route. Part of it is about being able to reach out to a larger audience – probably looking at developing markets such as Asia/ Africa where retail space is cheaper and people still prefer a physical shopping experience to online purchases( as Big Basket and Flipkart have learnt the tough way).
Amazon may be approaching this from 3 perspectives –
- Hit the likes of a Walmart/Tesco/ Macy’s before they ramp up efforts to provide a better omni-channel experience for their customers and pull them back from Amazon
- Acquire massive tomes of data on shopping preferences of customers from physical interactions at a store level
- Build a retail infrastructure which can be licensed out to other retail chains, much on the lines of AWS
While the first is more in the lines of a red ocean strategy, it doesn’t tie in with Amazon’s long term plans. However it could still make these companies bleed further and may create a point of consolidation where some of the smaller players look at getting acquired by Amazon or move into a different model.
The 2nd model can help Amazon in it’s long term growth opportunities by enabling better personalisation for online/offline customers and also help them identify how customers approach the offline purchase process. It can also help create a moat against future plans of Google/ Alibaba/Microsoft.
The 3rd strategy speaks about Amazon’s long term cloud vision where it acts as a multi-user platform enabling higher adoption both by customers and vendors. Through this model, Amazon is creating a situation where retail chains will have to consider divesting their vast legacy systems built with the likes of IBM/Microsoft/Oracle and adopt the new technology to stay relevant to consumers.
It’s also imperative for Google and Oracle/SAP to look at reaching out to retail chains to promote an alternative solution. With Google’s expertise in applying Machine Learning and Data science towards targeting Big Data problems, they can act as a smart enabler for retail chains currently utilizing an existing solution of Oracle/SAP. By linking it to their existing cloud strategy, Google can also subsidize access to data storage for retail chains and help keep the legacy systems relevant for clients. By accessing millions of photos of brands and SKUs, Google can train their algorithms to provide a real time alternative to Amazon Go.
The key here is to see whether Google/Oracle/IBM consider Amazon’s strategy as a customer acquisition strategy or a blue ocean strategy. There is a vast opportunity for Amazon to build the next AWS through this strategy and accumulate enough customer purchase preference information to guide them on becoming a monopoly.