Amazon goes BAM!* as a Service! (*Brick and Mortar)

What's next?

 

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Andreas Hell
senior management consultant

Wie geht es jetzt weiter?

 

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Sönke Iwers
digital consultant

Huh, what happened?

Amazon is building up its Go-Empire: In mid-February, Amazon opened a full-size Go Store with 1,000 sq. meters in their home-town Seattle after launching small Go Stores around the US. An initial plan was to launch > 3000 stores by 2021. Today Amazon launched their service offering Just Walk Out or their – let’s call it – BaMaaS (Brick-and-Mortar-as-a-Service).

After initially opening their shop in the early 2000s to become one of the world's biggest retail platforms, Amazon again starts to share its technology with other third parties. This is somewhat similar to a pledge made by Jeff Bezos years ago in which he addressed his employees as follows: "All service interfaces, without exception, must be designed from ground up to be externalizable". Looking at the Amazon empire, anything needs to have a business model and requires to be open to third parties. The "Just Walk Out Technology" follows that claim.

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Amazon goes BAM* as a Service! (*Brick and Mortar)

Amazon is heavily focusing on their customers: One of the major pain points in the customer shopping journey is the payment & check-out process – therefore, it is being remodeled by using various innovations in order to ease the underlying process behind it.

The idea of opening one’s own technology/supply chain enjoys global approval: H&M, the world’s second-biggest fashion retail group, recently opened up its whole global supply chain to other clothing brands and is trying to create a fashion ecosystem for small and medium sized companies.

Implications for businesses

What exactly are the implications for business? What are the changes to join the "Go Empire" of Amazon?
Easy access to latest technology

First of all, retailers will have access to the latest technology ecosystem. This ecosystem will mature even further while Amazon will put a lot of effort into steadily evolving their technology. This includes Amazon Alexa and Voice being available as blueprints for the development activities.

Data, Data, Data

Compared to an e-commerce customer journey, retailers are struggling to capture the same data on the shop floor. Amazon will tackle this issue with their technology. Customer behavior and the goods that were gazed at or shopped will be tracked easily. Not only retailers would benefit from the data, but even Amazon itself can learn from the data gathered.

Payment

As Amazon is focused on connecting their own product portfolio, the ‘Just Walk Out Technology’ system will preferably include Amazon Payment to improve customer experience from check-in to payment. This will increase the dependency towards Amazon for retailers, but will open opportunities, as more than 50% of U.S. households own a Prime Membership (and thus have provided payment credentials).

Automatic replenishment from Amazon Warehouses

A core discipline of a retailers is the planning and re-ordering based on customer demands. Storing the goods in an and re-ordering. If retailers use Amazon warehouses, automatic replenishment will demystify the magic of traditional replenishment processes within a company and automation will become a commodity.

Omnichannel

If retailers use either Amazon Warehouse as storage or Amazon’s online marketplace, the omnichannel solution provided by Amazon is just a fingertip away. Additionally, this enables stores, that are not online yet, to leverage their stock to Amazon‘s online platform.

Assortment

Thinking the omnichannel approach one step further, retailers can extend their assortment with complementary products to excite customers with an overall better shopping experience. All products of Amazon and Amazon Marketplace could be easily integrated into the offline experience. No negotiating with other brands or partners. Retailer simply select the right items and integrate them into the shop floor (adopting the nice pictures customers can see at &other stories). Connecting offline and online will be the key driver.

Strengthening of Amazon’s Cloud Services

Physical technology needs to process data in a very fast and efficient way. The number of SKUs and cameras in the store will push data processing to new heights. This huge amount of data needs to be processed by powerful cloud infrastructure in real-time. It will push AWS sales through new customers and will increase the utilization of existing server farms. It will be interesting to see the pricing model behind it. Yes, fewer employees will be in stores, but cloud infrastructure and a blazing fast connection does not come for free. Concluding from the points stated above, Amazon’s "Just Walk Out Technology" is like an "after burner" to accelerate the Amazon Flywheel once again.

 

What’s next?

Dear offline retailers: Preserving the status quo will lead to a dead end. The move of Amazon should be an alarming sign for all retailers. Technology is now available to everybody. New entrants to the markets will not wait, evaluate and observe the situation. New entrants will react fast, as fast as the technology at scale is available.

Yesterday, anybody who would like to sell goods online could do it right away. Today, offline is next. With StoreFront, Appear Here or the German startups Brickspaces any brand can search for available retail spaces and with Amazon’s ‘Just Walk Out Technology’ any brand or merchant can buy the necessary latest technology. Including the trend that more and more online businesses experiment with offline stores while smaller brands sell more items via Instagram than brands with long-lasting heritage, it can become an interesting combination.

Looking at the challenge of today’s online and offline business, all retailers need to challenge their own value chain and reconsider their actual USP. The value chain needs to reflect a retailer’s strategy and vision. Companies need to identify and build up strengths for the markets they operate in. Going unconventional (new) ways – with or without Amazon – can help in leveraging the potentials.

By the way: If you are in this position – let’s find out which technology and partners will meet your vision and customer demands best. There are multiple ways to find your individual solution. Ask us!

GOOD-TO-READ

In cooperation with the retail systems specialist Visplay we developed the New Retail Report 2019 that aims at providing insights into the latest developments in retail – learn more about the driving factors for the relevance of physical stores today.

 

What's next?

 

Your contact at diconium

Andreas Hell
senior management consultant

Wie geht es jetzt weiter?

 

Ihr Kontakt bei diconium

Sönke Iwers
digital consultant