A pedestrian passes in front of the new Amazon Go grocery store in Seattle, Washington, U.S., on Tuesday, Dec. 6, 2016. Photographer: David Ryder/Bloomberg
In the midst of the year’s busiest shopping season, Amazon.com Inc. surprised some with one of its next-gen commerce announcements. Amazon Go, which promises to eliminate the checkout altogether, generated headlines in mainstream media and prompted some to contemplate the potential demise of retail as we know it. Lost in all this hype is the fact that the brick-and-mortar apocalypse is no more likely today than it was before Amazon’s recent endeavor.
Of course, Amazon, which is the world’s largest internet retailer, has set the standard for commerce reinvention with fast delivery, near-invisible payments and other perks tied to its Amazon Prime membership platform . Amazon has outpaced the rapid growth of digital commerce in the retail industry globally, increasing its own market share from 12% in 2011 to 19% in 2016, according to the latest data from Euromonitor International. Since its founding in 1994, Amazon has continuously redefined what commerce means. While this Amazon Go idea is intriguing, the reality of a completely frictionless shopping experience is years from becoming mainstream.
Below are five ways Amazon is more likely to reinvent commerce in the near term:
(1) Changing how viewers consume media
Like Netflix and Hulu, Amazon is a key company changing the way viewers consume media. The creation and distribution of content is a major part of the Amazon Prime strategy and will continue to help drive sales of products on Amazon devices, where content can be most easily consumed. Amazon also has been redefining how content is sold through smaller bundled offerings. It now has partners like HBO and Showtime that issue their own subscriptions. The current reality is that no single streaming service has all the content people want, which means there is an opportunity for Amazon Video to become the gateway to other services.
(2) The digitization of home services
Amazon’s Home Services is another example of how this online retail giant has never viewed itself as a purveyor of only goods. Amazon, which launched its Home Services unit in 2015, now offers 1,200 services in more than 50 U.S. cities. Customers can select assembly or installation services, which will compete against those offered by retailers like Home Depot or Best Buy, in addition to other services like house cleaning, home repair and yard work, which will compete with Angie’s List. Throughout its 20-year history, Amazon has continued to explore areas of commerce that it believes it could disrupt and this is one ripe for disruption. In March, Amazon estimated that the on-demand home services market was valued between $400 to $800 billion.
(3) Moving beyond the smartphone
Amazon has been an early leader in commerce enabled through the growing “internet of things” universe. The online retailer offers products like Amazon Dash, as well as a platform for manufacturers to incorporate this system into its own products with brands like Brita and Whirlpool being early participants. Amazon Echo, powered by its virtual assistant Alexa, is one of Amazon’s most promising ventures in this space. Echo is a hands-free, voice-controlled device that can be directed by the user to play music, set an alarm or even order products on Amazon. While many connected appliances are not priced for mainstream adoption, Amazon Echo and its sister products are. In fact, Amazon reportedly sold nine times as many devices this holiday season as it did in 2015. Amazon has embraced open-source development, which should help to solidify Echo’s role in the future connected home as well as its role in this next-generation of connected commerce.
(4) Voice-enabled digital commerce
Natural language processing, which is the part of artificial intelligence field focused on making computers understand and speak the natural language of humans, has made considerable strides in recent years and is primed to disrupt the way consumers browse and buy. Amazon’s Alexa is becoming one of the most prominent voices. That is because Amazon did a lot of work this year to build an ecosystem around Alexa and ran a successful holiday campaign that resulted in Amazon Echo selling out. Amazon also made key moves, including creating an accelerator program for developers and teaming up with heavyweights like Google and Facebook to craft best practices around artificial intelligence. There has been a flurry of recent activity from major players like LG, Whirpool and Ford announcing Alexa integrations, which will allow owners to control their respective products by human voice. Of course, there is usually a commerce component. Ford drivers will be able to vocally place orders on Amazon while navigating traffic.
LG Electronics USA Vice President David VanderWaal (L) and Amazon Vice President Mike George display the LG Smart InstaView Door-in-Door refrigerator during a LG press event for CES 2017. (Photo by David Becker/Getty Images)
(5) Reinvention of the last mile
Amazon’s big attraction for consumers is its low prices, which can be reduced with free shipping. All of these freebies come at a cost, though. In the last year, Amazon’s fulfillment costs rose faster than sales. Amazon continues to reinvent the last mile, including an expansion of its global footprint of fulfillment centers globally and a 50% year-over-year increase in the number of robots filling those orders. In 2016, Amazon unveiled the first of 11 dedicated aircraft in the new Prime Air fleet, thus giving Amazon the ability to more adeptly maneuver items from city to city at times of peak demand. One of its most high-profile logistics projects is drone delivery. In late December, Amazon also filed a patent for an “airborne fulfillment center,” which would serve as a sort of mother ship for a fleet of drones.
An employee scans merchandise as she collects items for a customer’s delivery order from an Amazon.com Inc. fulfillment center in Peterborough, U.K., on Tuesday, Nov. 15, 2016. Photographer: Simon Dawson/Bloomberg
This drone experiment provides perspective for just how long it could be before an Amazon Go opens in your local neighborhood. Amazon CEO Jeff Bezos introduced the world to its futuristic delivery plan as part of a 60 Minutes interview in December 2013. Now some three years later and Amazon only recently completed its first drone delivery. At the same time, others have pushed forward with similar initiatives. In fact, drone delivery firm Flirtey recently announced it completed 77 drone deliveries on behalf of a nearby 7-Eleven store within a month. While Amazon plans to expand its drone testing in 2017 in hopes of one-day relying on unmanned aerial vehicles to deliver lightweight packages, any large-scale release is years away, which is also true for the adoption and expansion of its Amazon Go initiative.
