Published on: October 24, 2016Forbes
has a piece about Amazon's decision, after decades of assaulting the traditional bricks-and-mortar business model, to begin investing itself in the more earthbound/traditional forma of retailing - not just with Amazon Books stores, but also now with what is rumored to be a chain of "grocery stores and drive-in curbside locations for pick-up services."
The question is, "Why would Amazon choose to contaminate its highly efficient high-growth e-commerce model with traditional, scale-bound retail outlets? ... But whatever led Amazon to expand its physical presence offline can’t be incremental revenue alone. Amazon has already developed numerous network businesses over the years, including companies that offer video streaming, enterprise cloud computing (AWS), e-book and audiobook libraries, and in its latest foray, music streaming. What could be a rational justification for Amazon to go brick-and-mortar now?"
The story suggests that Amazon must see Walmart physical presence, especially once combined with the potential offered by its new Jet acquisition, as being a significant threat to its ability to disrupt and dominate the grocery business.
"Amazon’s one-hour delivery service is economically viable only in the denser, urban neighborhood," the story says. "However smart its algorithm is in offering discounts, recommending products, and showing ads, Amazon still lacks knowledge about shoppers’ experience in the grocery aisles. Yet bridging that knowledge gap is becoming increasingly important, as Wal-Mart is blurring the boundary between online and offline.
"To be sure, running physical outlets is not one of Amazon’s core competencies. But neither is running physical bookstores. When the company opened its first bookstore last year, visitors noticed a number of unusual tweaks: each book is positioned with its cover exposed, rather than showing its spine like in a traditional store. In addition, small black cards placed below each book provide customer review data pulled from Amazon’s website."
And so the question remains, what "tweaks" will Amazon apply to any grocery store format it might open ... and how will it look to apply a traditionally algorithm-based approach to retailing in a far more traditional setting.