Category: Amazon

  • Bread and Biometrics

    Amazon’s pay-by-palm technology is being tested in select Panera locations in the US. JP Morgan will also begin piloting biometrics-based payments with US retailers this year.

    According to Google Intelligence, global biometric payments are expected to reach $5.8 trillion and three billion users by 2026.

    Are shoppers ready for this next level of convenience? How will Amazon benefit? And how can linking loyalty programmes create a more personalised (perhaps too personalised) experience?

     

  • Amazon: From Pandemic Power Grab to Pandemic Hangover

    Amazon: From Pandemic Power Grab to Pandemic Hangover

    We often think of Amazon as one of those invincible brands. A bulletproof business. But like a lot of tech companies they thrived during the pandemic and now they’re finding life difficult.

    Why?

    1) General volatility. Like all retailers, Amazon is grappling with unprecedented cost inflation at a time when consumer demand remains sluggish. That’s a dangerous combo for any business but in Amazon’s case it’s exacerbated by the fact that during the pandemic they OVER-HIRED (added half a million workers in 2020 alone – not even Walmart, the largest private employer in the US, has ever added so many employees in a given year) and OVER-EXPANDED (essentially doubled their fulfilment network) to help cope with the huge surge in demand for online shopping and cloud computing.

    natalie berg amazon bbc

    2) Recalibration: return to IRL shopping. We’ve now had a year of relative normality. The world is far more hybrid than we could have ever imagined pre-2020 but the pandemic has taught us the value of stores in this digital era. Shoppers are abandoning e-commerce and returning to bricks & mortar. They’re looking for value over convenience and delaying those discretionary buys. Important to bear in mind here that e-com penetration rates are still higher vs pre-pandemic levels (both US and UK). But the pandemic has reaffirmed that the future of retail is NOT e-commerce – it’s a blended mix of physical and digital commerce.

    As a result, Amazon is looking unusually vulnerable.

    And, longer term, I believe Amazon will go from disruptor to disrupted. More on that next time.

  • When Do We Stop Calling Amazon a Retailer?

    When Do We Stop Calling Amazon a Retailer?

    A question I often get asked is what is Amazon? Amazon sells everything from nappies to treadmills, but it also produces hit television shows and provides cloud computing services to clients ranging from McDonald’s to NASA. Amazon is also a hardware manufacturer, payment processor, technology provider, advertising platform, virtual tour operator, ocean freight business, publisher, wi-fi system, delivery network, fashion designer, private label business and an airline.

    Portland, Oregon, USA – September 2, 2019: An Amazon Air Boeing 737 landing at Portland International Airport on a sunny summer day.

    It doesn’t stop there. Amazon is a supermarket (and now officially designated one here in the UK by the Competition and Markets Authority). It also operates America’s largest civilian surveillance network. Amazon is a pharmacy and healthcare provider and has dabbled in restaurant delivery, luxury goods and hair salons. It has even tried to cure the common cold (yes, really).

    So, going back to the original question – what is Amazon? Certainly not just a retailer.

    In fact, as Amazon continues to diversify its revenue streams, its retail division – as a percentage of sales – becomes less significant. In 2021, Amazon’s global net product sales amounted to $242 billion, representing 51% of Amazon’s total net sales (versus 87% a decade ago). 2022 will be the tipping point when most of Amazon’s sales come from services, not from shifting goods. Amazon is rapidly transitioning from merchant to infrastructure.

    So let’s break that down a bit because, with the exception of Amazon Web Services (AWS), its services are heavily intertwined with its core retail operation. Remember, Amazon doesn’t own the majority of stuff that is sold on its marketplace, but instead takes commission on third-party sales and, in many cases, charges for shipping and fulfilment. This is by far its biggest “service” revenue stream: globally, sales from third-party seller services nearly doubled over the past two years to become a $104 billion business.

    As third-party sales continue to grow as a percentage of total paid units, Amazon’s stated sales become less reflective of the gross merchandise volume moving through Amazon.

    The pandemic has clearly cemented Amazon’s status as the indispensable route to market, as we’ve witnessed a swathe of shoppers, retailers and brands flocking to its platform. And, of course, as Amazon’s marketplace becomes more crowded, the need for visibility becomes more urgent. This has catapulted one of Amazon’s more nascent, but hugely promising businesses – advertising. For the first time ever, Amazon disclosed the size of its advertising business – at $31 billion it is bigger than the online advertising revenues of Microsoft, Snap and Pinterest combined.

    It’s also worth comparing advertising to Amazon’s other revenue streams. Advertising, which is growing at around 60% annually, generates more sales than Amazon’s physical stores and it’s even bigger than Amazon’s Prime subscription business.

    Prime, which is very much the glue of Amazon’s ecosystem, is a service that is about to get more expensive for shoppers, at least in the US. Amazon recently announced a fee hike of $20 annually, which should help to achieve two things. Firstly, it will soften the blow of rising shipping and labour costs that Amazon and the rest of the industry is grappling with. Secondly, Amazon has been in major spending mode recently, and in relation to Prime, the fees will help to offset Amazon’s extra investment in digital content in addition to some of the more logistically complex promises such as “free” same-day grocery delivery.

    Prime fee hikes were inevitable and, in my opinion, are we are likely to see a similar hike here in the UK later this year. It’s a delicate balance at a time when household budgets are being so severely squeezed, but Prime has become a way of life for many. The nature of its bundle proposition has become wildly relevant for today’s shopper – Amazon added over 50 million new Prime members globally throughout the pandemic. We’ll see some attrition of those newly acquired, perhaps more hard-pressed Prime subscribers, but I imagine the vast majority of members are far too wedded to the brand and broader ecosystem to even blink an eye.

    Of course, it’s not just the revenues generated from services linked to the success of its core retail division – third-party seller fees, advertising and Prime subscriptions – that are poised for solid future growth. But we have to remember that Amazon is a technology company at heart. AWS may only account for 13% of global sales but it remains the cash cow of the business. Its remarkable growth has been fuelled by the pandemic-driven acceleration of cloud adoption, and there is no sign of this slowing down with further expansion planned in the Asia-Pacific region and Canada.

    With Amazon, things are not always what they seem. Amazon is quietly becoming the rails that the retail and many other sectors run on. Its moves are designed to strengthen other aspects of the business. For example, Amazon continues to explore the lucrative world of licensing its Just Walk Out technology to other retailers, such as Sainsbury’s. But its checkout-free systems are naturally underpinned by AWS so an increase in demand for Just Walk Out technology also bolsters Amazon’s most profitable business segment. 

    So, no, Amazon is not a retailer but a tech company that is becoming increasingly reliant on services as a means of driving topline growth. It just happens to sell a lot of stuff in the process.

  • New Book Explores Amazon’s Pandemic Power Grab

    New Book Explores Amazon’s Pandemic Power Grab

    The COVID crisis has upended shopping habits and forever changed the world of retail, according to the second edition of Amazon: How the World’s Most Relentless Retailer Will Continue to Revolutionize Commerce. Authors Natalie Berg and Miya Knights argue that while COVID sounded the death knell for many businesses, one retailer in particular has come out stronger: Amazon is hands-down the undisputed winner of the pandemic.

    With crisis comes opportunity – for Amazon at least. While many retailers muddled their way through the pandemic, Amazon propelled itself into new industries, made blockbuster acquisitions, launched new products and brands, and doubled down on technology. The retailer hired hundreds of thousands of employees, unveiled new store formats, turned disused malls into warehouses, and even added a couple of new markets to its roster. A key theme of this crisis is that the strong will emerge stronger.

    “Amazon’s business model may not have been intentionally built for a pandemic, but it has turned out to be highly relevant in such a climate,” said co-author Natalie Berg. “Amazon is seemingly invincible these days. The pandemic-induced shift towards a more digital world has strengthened every aspect of its business – retail, cloud computing, advertising, Prime and Alexa.”

    Amazon is now firing on all cylinders. It has woven itself into the fabric of our everyday lives and, in the absence of regulatory intervention, will continue to benefit from post-pandemic tailwinds,” concluded Berg.

    The authors argue that the pandemic has afforded Amazon a unique opportunity to tighten its grip on consumers and bolster its broader ecosystem by:

    • Reinforcing its status as the indispensable route to market
    • Further embedding itself in consumers’ homes
    • Accelerating its vision as a technology vendor

    Co-author Miya Knights added: “The second edition underlines Amazon’s seismic digitally-enabled impact on the retail landscape. Technology has always moved at breakneck speed, but the added catalytic effect of the pandemic has only spurred Amazon’s ambitions to use its tech advantage to consolidate and grow its dominant market position.”

    Knights continued: “This is a crucial time of transition for new CEO Andy Jassy as he is tasked with convincing lawmakers that Amazon’s ubiquity is good for the economy – and for democracy as a whole. His number one job will be ensuring Amazon doesn’t go from disruptor to disrupted.”

    The book also advises how retailers can co-exist with Amazon and identifies six key retail trends being accelerated by the pandemic:

    1. The demise of ‘status-quo retail’
    2. Digital transformation: COVID will finish what Amazon started
    3. The digital store: frictionless shopping and no-touch checkout
    4. The store as a fulfilment hub: the future of e-commerce is stores
    5. The democratisation of white-glove service
    6. The shift to conscious consumption

    With the first edition now translated into more than a dozen languages, Amazon is an invaluable resource for discovering the lessons that can be learned from the retailer’s unprecedented rise to dominance.

    To arrange an interview with Natalie or Miya, or to request a sample chapter, please email hello@nbkretail.com.

    About the authors:

    Natalie Berg is a Retail Analyst and Founder of NBK Retail, a consultancy specialising in retail strategy and future trends. Regarded as one of the world’s Top 20 retail influencers, Natalie has led research and given talks on a range of industry topics including: reimagining retail for the post-pandemic digital era, store of the future, the convergence of physical and digital retail, customer loyalty and discount retailing. She is a regular TV and radio commentator and her views on retail have been published in the FT, Guardian, BBC and The Times, among others. Natalie is also a guest contributor for Forbes and Retail Week.

    Miya Knights is Global Content Strategist at poq Commerce, with 25 years’ experience as an analyst, journalist and editor specializing in retail enterprise technology use. Based in Sussex, she is the owner and publisher of Retail Technology magazine and has appeared on the BBC, Channel 4 and Euronews and commented in The TelegraphThe Times and The Financial Times among others, as well as regularly speaking at or moderating industry events. She has also been recognised as the 2021 Arts & Media Senior Leader by the Black British Business Awards. 

    Additional files:

    Amazon book cover (high res)

    Natalie Berg headshot

    Miya Knights headshot

    –ENDS–

  • Co-op Becomes The Latest Supermarket To Run On Amazon’s Rails

    Co-op Becomes The Latest Supermarket To Run On Amazon’s Rails

    The ultimate frenemy, Amazon has added another major British supermarket to its roster. Co-op shoppers can now do their full grocery shop on Amazon, with access to the supermarket’s range of 3,000 items and “free” same-day delivery for Prime members. The service will initially be available in the Glasgow area before expanding across the UK in the coming months, as Co-op aims to double online sales by the end of the year.

    Co-op joins the likes of Morrisons, Booths and Amazon’s own Whole Foods Market as supermarket chains now accessible via Amazon’s platform. So why are retailers increasingly content to overlook the huge competitive threat posed by the e-commerce giant? Three reasons: Amazon’s reach, technological prowess and fulfilment capabilities.

    Read my full article on Forbes

  • Bye Bye Bezos

    Bye Bye Bezos

    The changing of the guard at Amazon. After more than a quarter of a century at the helm, Amazon’s founder CEO Jeff Bezos is handing over the reins to former AWS boss Andy Jassy. In this interview with BBC World, I discuss with Sally Bundock the two key challenges that Jassy will inherit – the threat of regulatory action to curtail Amazon’s dominance and ensuring that Amazon does not go from disruptor to disrupted in the future.

    And some good news! The second edition of my and Miya Knights’ book Amazon: How the World’s Most Relentless Retailer Will Continue to Revolutionize Commerce is now available for pre-order.

  • Amazon UK debuts its till-free concept

    Amazon UK debuts its till-free concept

    Future of e-commerce? Stores, of course!

    Big media day yesterday covering the news that Amazon has debuted its checkout-free store concept in London. 

    This is watershed moment for U.K. retail. Amazon is known for disrupting the status quo, raising customer expectations and forcing competitors to raise their game. Remember Amazon is a tech company first, retailer second. The big question is – does Amazon really want to become Britain’s biggest supermarket or perhaps it’s more lucrative to license this tech to… everyone else? Either way, Amazon transformed the checkout experience online and will now do the same in-store. Goodbye, friction!

    If you haven’t yet had a chance to visit the Ealing store, there is a photo gallery and additional commentary available on Retail Week.
    Stay tuned for further analysis.
    Cover photo: Amazon
  • They know exactly what you want. Can anyone stop Amazon’s domination?

    They know exactly what you want. Can anyone stop Amazon’s domination?

    What is the secret to Amazon’s success in a nutshell? A relentless dissatisfaction with the status quo. Love or loathe it, we have to credit Amazon for stamping out complacency in retail. Fast and free delivery, one-click shopping, user-generated reviews, checkout-free stores, voice shopping, the list goes on. If Amazon didn’t exist, shoppers today would be far more tolerant of mediocre retail experiences.

    Covid-19 has further fuelled its appetite for disruption. This week Amazon hit the nuclear button. By offering free delivery of groceries, Amazon is capitalising on a once-in-a-lifetime opportunity to acquire market share. This is the boldest move it has ever made on this side of the Atlantic, and the worst possible news for the supermarkets who were finally getting comfortable with online deliveries in the middle of a pandemic.

    Read the full piece in the Evening Standard.

  • Amazon Go Grocery – Learning From Tesco’s Fresh & Easy Failure

    Amazon Go Grocery – Learning From Tesco’s Fresh & Easy Failure

    Picture this – a radical new grocery concept designed to revolutionize how Americans shop. The store is much smaller than your typical supermarket, around 10,000 square feet and stocking an edited range of just several thousand products. The store doesn’t feature banks of traditional checkouts; instead it’s a heavily automated and efficiency-driven experience. There are no bakeries, butchers, or any of the counter services you’d find in most supermarkets.

    Nope, I’m not talking about Amazon’s latest cashierless grocery format, Amazon Go Grocery, which launched in Seattle this week. I’m talking about the now defunct Fresh & Easy, Tesco’s failed attempt to crack the US grocery market.

    In my latest piece for Forbes, I explore 3 key learnings for Amazon:

    1) Have a clear proposition.

    2) Destroy the friction, not the experience.

    3) Expansion does not indicate success.

    You can read the full article here.

  • How to compete with Amazon

    How to compete with Amazon

    How can retailers compete with Amazon? This is the question that my co-author Miya Knights and I get asked most since publishing our book earlier this year.

    First, let’s address the myth that Amazon is a retailer. It’s not.

    Amazon is a technology company with deep pockets, an appetite for disruption, and a constant dissatisfaction with the status quo. Amazon is a fierce competitor not only because it is infatuated with its customers, but also because it has the advantage of playing by its own rules, shunning short-termism and other traditional constraints faced by public retailers.

    From a CX perspective, Amazon has made online shopping completely and utterly effortless. The ability to access millions of products and have them magically turn up on your doorstep the same or next day is pretty powerful, and Amazon has gone to great lengths to ensure that the experience is as seamless as possible. They continue to reduce friction by shortening the path to purchase – this will be a key focus in the future as Amazon relies more heavily on its own devices to funnel purchases through to its platform.

    Ultimately, it’s the ease of buying through Amazon or, as Miya often says, it’s how Amazon sells rather than what it sells that distinguishes them from their peers.

    Amazon is the ultimate friction killer, but that inherently makes them somewhat of an experience killer. Amazon is functional, it’s transactional. It’s great for ‘buying’, but pretty awful for ‘shopping’. So how can retailers remain relevant in the age of Amazon?

    Firstly, there is an element of keeping up with the Joneses. Most of Amazon’s innovations catch competitors on the back foot, leaving them in the undesirable position of reacting to rather than leading change. Ceaseless innovation from Amazon raises customer expectations which in turn leads competitors to raise their game and ultimately results in a better experience for the shopper. What would retail look like if Amazon didn’t exist? In a nutshell, customers would be far more tolerant of mediocre service.

    No one can out-Amazon Amazon, but retailers must prioritise investment in the areas where Amazon is genuinely disrupting customer expectations – frictionless e-commerce experience, delivery speed and choice, voice shopping, auto-replenishment, checkout-free stores and, increasingly, a digitally enabled instore experience.

    That’s just basic hygiene. The real opportunity for bricks & mortar retailers is to focus on WACD – What Amazon Can’t Do. That’s experience, curation, discovery, inspiration, human touch, community. It’s time to inject some personality and soul back into stores, to make them desirable places to visit, places worth ditching our screens for.

    Amazon taken the touch and feel out of shopping and there is a massive opportunity for retailers to distance themselves from this by offering customers an immersive, memorable experience that simply can’t be replicated online. But this requires a titanic cultural shift and an entirely new set of skills from store associates who must transition to become genuine brand ambassadors. Stores must go well beyond the product, beyond the transaction. They must become places to eat, play, work, discover, learn and even rent stuff. In the future, retail space will be less about retail.

    In summary, there is no single formula for competing with Amazon but retailers can take lessons from the tech giant itself by starting with the customer and working backwards. Think of your stores as assets and not liabilities. Reposition them as fulfilment hubs to cater to growing demand for same-day delivery and instore collections, while potentially beating Amazon to the chase by addressing the ticking time bomb that is returns. The instore experience must be frictionless to emulate the convenience of buying online, but also experiential to differentiate from Amazon’s transactional nature. The rise of Amazon will also make for strange bedfellows – collaboration, in some cases with Amazon itself, should be viewed as an essential component of retail strategy in a bid to stay relevant to customers.

    This post originally featured on RingCentral’s blog.