Is Amazon readying itself to become king of click-and-collect?
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Is Amazon readying itself to become king of click-and-collect?

Amazon, long the dominant force in online retail worldwide, is increasingly looking to become the dominant force in… well, everything. Jeff Bezos’ online “everything shop” has spread out into artificial intelligence (AI) virtual personal assistants (Alexa, the Amazon Echo speaker system that orders your groceries, plays your music, and tells you jokes). It’s made massive in-roads into cloud hosting, streaming video and music services, offline retail, and more. And now, it might be looking to become a dominant force in yet another type of retail: click-and-collect.

Amazon’s share price has increased by 23% so far this year

03 04 amazon

Source: Yahoo Finance

Click-and-Collect (CC) is a simple concept: a hybrid business model that lets users purchase and pay online, then collect in-person from a pick-up point (usually, a store). This kind of multi-channel retail experience is well within Amazon’s wheelhouse – and the company is likely to build its CC capacity quickly. Its online ecosystem is the best developed in the world, and can easily power the first half of the process. Meanwhile, it has Whole Foods stores dotted around the US, and is looking to create as many as 3,000 cashierless Amazon Go stores by 2021 (at time of writing, the company has just 10).

Right now, Amazon is a small player in this segment of the retail world. Arch-rival (in the US, anyway) Walmart is leading the charge to popularise CC – but Walmart has demonstrated time and again that it doesn’t have Amazon’s agility when it comes to disrupting its own (and others’) business models. Currently, Amazon has Whole Foods in 22 cities that are offering a CC service – and its brick-and-mortar distribution for products beyond groceries is meagre.

But the whole point about Amazon is that this could change overnight. The company would be more than capable of devoting a greater portion of its Whole Food empire to CC (and for products beyond groceries) because its supply chains are so tight that it can restock these outlets far faster than a business of more limited scale would be able to. And Amazon Go could easily incorporate CC if Mr. Bezos and his right (and left) hand men decided it was in their interest.

Amazon is such a well-oiled machine that it could deploy, publicise, and incentivise, this business model almost instantly. Unlike Walmart (and others) it has streaming services to advertise it on. And, of course, it has millions of loyal Prime customers that could be offered juicy discounts for trying out the new style of shopping. Perhaps most importantly, it has the money to waste. Anyone who has looked at Amazon’s financials over the past few years knows that the company is sitting on a huge cash generator – and Mr. Bezos has been very upfront about his willingness to commit to costly mistakes. His logic is simple: one of them will become The Next Big Thing.

According to Cowen & Co., grocery pickup will account for about $35 billion in sales in the US by 2020. That’s a significant amount – but when you consider that Amazon’s fourth quarter of 2018 saw sales of more-than $72 billion, it’s clear that it’s not a disruption. The question, then, comes down to one thing: does Amazon think CC will be a big part of the future of retail? If it decides the answer to that is yes, then expect it to become a market-leader in short-order.

Disclosure

Dominion holds Amazon in its Global Trends Ecommerce Fund.


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