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Welcome to slackingoff, where we have in-depth conversations on whatever is particularly interesting. Follow below.

Go Amazon ➡️

Go Amazon ➡️

ameet
What's up Anthony.

anthony
I've been keeping tabs on this Amazon Go store launch in Seattle. Pretty interesting.

ameet
What a hard transition. Okay let's get into it:

ameet
The New York Times
Inside Amazon Go, a Store of the Future
The technology inside Amazon’s new convenience store, opening Monday in downtown Seattle, enables a shopping experience like no other — including no checkout lines.

ameet
This is really something. I'm very happy that we live in a world in which computer vision and machine learning allow me to walk into a store and grab beer without having to speak to anyone:

anthony
Important to note that this store is only available to Amazon Prime members. They've invested heavily in increasing the utility of Prime outside of the 2 day shipping (Prime Videos, Amazon Music and now this). While this is still just a test for Amazon, you can see the outlines of their physical retail strategy.

ameet
That's exactly right, and it's a fun exercise to think through all the ways they could iterate on this concept. So for one thing, I noticed in a different article's coverage that (just like Amazon.com) the stores sell both Amazon-branded products and third-party merchandise, including your favorite:

ameet

ameet
Just as with their e-commerce activities, Amazon can analyze what the most popular items are against a given store's demographics and location and use that to create new SKUs. Maybe Amazon's in-house flavored seltzer water is on the way?

anthony
I wouldn't be surprised by that. The expansion of the AmazonBasics portfolio is staggering.
qz.com
Quartz
AmazonBasics is moving well beyond the basics
Quartz trawled through the Internet Archive’s Wayback Machine, which archives websites throughout the history of the web, to see how many products Amazon has offered on its AmazonBasics landing page. The earliest archived result is for Jun. 8, 2013, when 252 products were listed for sale. Four and a half years later, there are currently 1,506 products for sale.

anthony
By opening up physical locations, Amazon branded products that wouldn't be cost efficient to ship can now be sold at these stores. 1500 AmazonBasics products today can expand by a few thousand if they really want to grow this business.

ameet
Yeah that makes sense. Beyond that Amazon can take their Amazon Advertising Platform (which has heretofore kind of flown under the radar) to good use:

ameet
WSJ
How Amazon’s Ad Business Could Threaten Google and Facebook
As Amazon.com Inc. builds out its advertising services and sales team, it increasingly impinges on the turf of two other tech titans, Facebook Inc. and Alphabet Inc.’s Google.

ameet

For that, Amazon has a web-spanning advertising network just like Google’s and Facebook’s—which is the reason a vacuum cleaner you once almost bought can haunt you for weeks on random websites. The Amazon Advertising Platform lets advertisers manage ad buys across multiple advertising exchanges, and it has quietly become as familiar to marketers as its equivalent from Google-owned DoubleClick.


ameet
As it stands now, if an advertiser utilizes the Amazon Advertising Platform (AAP) to serve me an ad for some product, Amazon can then track whether that impression resulted in a purchase of said item on Amazon.com. That level of precision measurement with respect to advertising attribution is really new and allows them to (for example) get paid by La Croix as an advertiser and then take a cut of the same brand's product sales on Amazon.com. What makes that interesting within the context of Amazon Go is that they can now extend the same attribution capabilities to items that were previously out of scope for this kind of advertising, like individual bags of Sour Patch Kids, or a single case of beer, or an small pack of pasta. This is very unprecedented and kind of merges the "awareness" goals of brand advertising with the measurement of direct response advertising.


For example, if I'm the Sour Patch Kids brand manager, I can currently leverage the AAP to reach 18-30 year-old females in the Seattle area. However you can easily imagine a world in which I can also sub-target only those who are Prime Subscribers so that when those individuals later to go to the Amazon Go store (because why would an Amazon Prime member go to any other store for grab-and-go items) I have to then pay Amazon again for driving that purchase.


Given that, it also wouldn't surprise me if Amazon allows companies to pay them for premier shelf space. Google allows advertisers to pay for premium placement in search results so why can't Amazon also allow brands to bid for the right to physical shelf space locations in an algorithmic manner as well? Though I'd hate to be the worker who has to go in there and constantly re-arrange boxes of salad.


anthony
Good points here but I want to step back and think about how their newest acquisition, Whole Foods, plays into their offline strategy. Look at this announcement re: Whole Foods and Amazon Prime.

anthony
WSJ
Amazon to Deliver Whole Foods Groceries
The online retail giant will add Whole Foods to its one- and two-hour delivery option, Prime Now, in the grocer’s hometown of Austin, Texas, as well as Dallas, Virginia Beach, Va. and Cincinnati, Ohio.

anthony
If Amazon is successful with same day grocery delivery, it allows them to re-imagine the grocery shopping experience. Instead of designing a store to mostly support customer accessible inventory in the form of shelves and aisles, grocery stores can potentially hold a lot more inventory accessible to only robots and employees as they fill delivery orders. Each Whole Foods can essentially become a free standing warehouse and enables the company to really expand their grocery delivery footprint.

ameet
That makes sense, and actually when you think about how much flexibility Amazon gets from not having people around (sorry workers), it opens up lots of really intriguing possibilities around the retail experience. Amazon can leverage different parts of its technology stack to provide a truly differentiated customer experience at a superior cost structure.


For example, for convenience stores (which is what Amazon Go is) they are doing away with the checkout and staff, allowing people to just grab-and-go whatever items they need. This wouldn't be possible without their existing Prime membership technology (that online-offline integration).


In addition, Amazon could go after big box retailers like Best Buy. I can see them building out a "showroom" of sorts which has zero inventory, just a big room with one unit of each SKU (like a few types of TVs). Customers can see the items in-person (which some people really value, especially for bigger-ticket items like TVs). However, when the customer goes to checkout, instead of grabbing some massive box off a shelf and lugging it home, the customer simply places an Amazon.com order at the store after which the item is delivered like any other item by next-day or same-day shipping. This also means that Amazon can build big box retail-type "experiences" in a much smaller footprint than your typical Best Buy because they don't need to carry any inventory.

anthony
It seems like there will be a few different types of stores (supermarkets, convenience stores and showrooms). How do you think Amazon is going to figure out what type of store to build in different locations and markets?

ameet
I mean what's really cool here is that Amazon has all the data about what their customers buy and can overlay that with demographic data and income information. As a result they can tailor individual stores, specific layouts and customize product mixes based on location. So for example they could look at typical Amazon.com purchasing behavior in Manhattan and decide how much incremental purchase "lift" a store in Union Square would generate versus one near Penn Station. What's more they could also design the stores based on what people are buying; if they know that customers in Midtown Manhattan don't buy as many TVs on Amazon because of the few Best Buy locations there, Amazon could fairly quickly stand up a TV "showroom" just to capitalize on the need.


Given all that I wonder how traditional retailers with legacy cost structures are going to compete.

anthony
There are companies that have thrived in the age of Amazon. Take a look at Best Buy which was looking like another beaten down retailer just a few years ago. usatoday.com
USA TODAY
Best Buy's resurgence continues despite fierce competition
The resurgence of electronics retailer Best Buy accelerated amid strong sales of products such as wearable technology and smart-home devices.

anthony

"Against a backdrop of continued healthy consumer confidence, we believe broad-based product innovation is resonating with consumers and driving higher spend," Best Buy CEO Hubert Joly said in a statement. "And, with our effective merchandising and marketing activities, combined with our expert advice and service available online, in-store and in-home — we are garnering an increasing share of those dollars.”


anthony
Best Buy has found a strategy of creating a personal and attentive shopping experience with in-store online pickup and in home digital experts that Amazon traditionally couldn't compete with. We're only now seeing Amazon's making a push into offline retail.

anthony
Traditional retailers will need to continue to improve their e-commerce experience and better integrate these two channels together. If companies are not offering same day or one day ship to store, their management team might want to implement this as soon as possible as a moat against Amazon's inevitable push into your space.


Companies should also explore partnership with other tech companies like Google Shopping Express and Instacart to provide the technical and logistical infrastructure needed for on-demand fulfillment.


It isn't doom and gloom for all traditional retailers but it is important to recognize and act quickly to stay competitive against an ever growing Amazon.

ameet
Yes the recurring theme here is to try tightly integrate your online/offline presence and provide a differentiated experience. We're definitely in for some pretty wild times in physical retail.

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