Amazon Go’s plans to recreate the high street spawn imitators
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Amazon Go’s plans to recreate the high street spawn imitators

Imitation, the say, is the most-sincere for of flattery. If that’s true, then Amazon must be feeling very flattered indeed. Just one year after its debut, Amazon Go – the ecommerce giant’s fledgling brick-and-mortar empire that is famous for its lack of cashiers – has spawned a gaggle of smaller competitors. It’s clear why: Amazon’s innovation in brick-and-mortar, frictionless convenience stores where you can walk in, get what you want, and just leave, was a wonderful idea.

January’s not even over, and Amazon’s share price is already up 12% year to date

graph 23 amazon

Source: Yahoo Finance

The thesis might look a little like this: there are many reasons ecommerce is disrupting retail, but a really big one is convenience. And as ecommerce has become more mature, the generations that have grown up with Amazon and other online retailers don’t just like that convenience – they demand it. But that doesn’t mean they never leave the house, and never want to buy something on the go… how to capture that spending? By bringing the same kind of convenience to the physical world that ecommerce brought to the digital world.

graph 23 amazon2

Source: Pitchbook Data Inc. and Bloomberg

Michael Suswal, the co-founder of one of Amazon Go’s new competitors noted that the tech was “coming regardless” of Amazon’s moves, but added that the ecommerce titan “gave the space validity and forced competitors to look for a way to compete.” That may be true, but there are three good reasons (beyond the pioneering brain of Jeff Bezos and other Amazon top brass) that it got the first move in: depth of pockets, depth of knowledge, and depth of (artificial) intelligence.

Amazon’s incredible wealth gives it the freedom to throw significant wads of cash at innovations that poorer companies just couldn’t risk. And its decades of retail experience make it the obvious first mover out of its Big Tech peers. Lastly, the company’s expertise in artificial intelligence is what has driven the Amazon Go venture. These three factors – along with one more – are the reasons Amazon is perfectly positioned to gain and retain control of this space for the foreseeable future – no matter what brick-and-mortar enthused upstarts believe.

The last factor is, of course, Amazon’s incredibly sticky ecosystem. Amazon Go will not just be one more cashierless store, it will be a physical extension of the company’s online presence. What benefits will being an Amazon Prime member offer Amazon Go shoppers? Discounts? Credit? VIP services? And how will Alexa link up with Amazon Go? Will you one day be able to talk to Alexa on your way into work and find your goods ready and waiting? These ideas are the obvious ‘tip of the iceberg’ kind of thing that writers love to speculate on – the eventual rollout of such interconnected features will likely be far more impressive and far more powerful.

And as Amazon continues to expand its ecosystem across various industries (finance, pharmacies, cloud computing) expect the potential benefits of integration to increase alongside economies of scale. In other words: when it comes to this potentially huge nascent retail space, the deck is firmly stacked in Amazon’s favour.

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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