Published on: March 7, 2018
Content Guy's Note: The goal of "The Innovation Conversation" is to explore some facet of the fast-changing, technology-driven retail landscape and how it affects businesses and consumers. It is, we think, fertile territory ... and one that Tom Furphy - a former Amazon executive, the originator of Amazon Fresh, and currently CEO and Managing Director of Consumer Equity Partners (CEP), a venture capital and venture development firm in Seattle, WA, that works with many top retailers and manufacturers - is uniquely positioned to address.
This week, the importance of testing cycles, iterations and failures … and changing the culture … if companies really want to move forward.
And now, the Conversation continues…
KC: Let’s start with Amazon’s decision to buy Ring, which manufactures internet-connected doorbells and cameras, for $1.1 billion. For me, this was just another part of Amazon’s connect-the-dots approach to creating an ecosystem, since it will connect to its Alexa-based system and conceivably would help enable its initiative to allow Amazon personnel to not just deliver to the home, but into the home.
But I’m just speculating here. I don’t have a Ring. You do. So tell me about its functionality and relevance, and where you think it can go.
Tom Furphy: We love our Ring doorbell. Installation was easy, using the wiring and wall box of our existing doorbell. I simply downloaded the app, followed instructions and it was installed and connected to our wi-fi in about 15 minutes. Whenever anyone comes to our front door the app sends us a notification. By clicking on the notification, we can see who is at the door and can even speak with them. We can do this from a room inside the house, across town or across the globe. It also captures and keeps a video log of activity at our front door.
Ring allows us to see deliveries that are made when we’re not home. And it’s also gives me an added peace of mind when I’m traveling to see the comings and goings at our front door. Ring is rolling out a range of products including motion cameras, motion lights with cameras, and monitored and connected security. The platform will have a constant pulse on everything that is happening around the house. Perhaps it’s a little “big brother-ish”. But I will say it is very comforting to have it in place.
Imagine the power this brings to Amazon. They will be able to literally extend the visibility of the supply chain to the doorstep. They can send a signal to their customers that their package has arrived, real time, with video evidence. They can even have visibility into the home and perhaps ultimately to the pantry and refrigerator as more cameras or sensors are introduced. When this incorporates with their contextual customer engagement via the Alexa platform, it gets really exciting. The data and their ability to be responsive to customer demand will be amazing. Assuming they continue to respect privacy boundaries, they have just increased their lead even further.
KC: We had a story on MNB last week about a startup called AiFi, which “emerged from stealth mode” to begin offering a checkout-free solution for retailers, scalable from single store retailers to chains of thousands of stores. And in addition to monitoring products in a store, it also tracks consumer behavior in a way that should allow retailers to act more effectively in a way that is relevant to the shopper.
This story made me think that maybe Amazon doesn’t have a big a head start on this kind of stuff as some of us may have believed, though there is a big difference between having this kind of technology available and actually using it. But it is the second part of this statement that strikes me as most important - while traditional retailers have the ability to work with outside companies to do things like consumer replenishment and checkout-free stores, they actually have to invest in these initiatives and understand that this is a play for long-term sustainability, not short-term returns.
TF: Amen! Thinking about innovation, planning for it and even having your data in a good place for it is all very important. But it’s merely a prerequisite. Even with all that, you have to actually try things. You have to go through testing cycles, iterations and failures to truly move forward. That’s how you change the culture and actually move the needle for shoppers. There’s not nearly enough of that across retail today.
You mention replenishment. Amazon has been in the consumer replenishment business for 12 years. They’ve generated mountains of data and have spent years refining their portfolio of replenishment capabilities. This has turned into a massive growth engine for them which Goldman Sachs projects to be worth $160B in annual sales by 2027. They are miles ahead of other retailers who might have great customer data, but limited capabilities to actually leverage that data. It will be difficult for others to quickly gain the experience that Amazon has in building these replenishment utilities. They can naively try to do it themselves, but it will slow them down and they will lose customers along the way to Amazon and more capable retailers.
I would think it’s comforting for retailers to know that AiFi is coming to market with a solution to compete with Amazon’s Go technology. AiFi says that it can be used in a number of formats. That’s great. Since they’ve been a company for just two years, I’d have to think they still have many kinks to work out. We won’t know what they have and how close they are to Amazon until we see it actually being used. But it’s promising to see others working on it. Retailers should begin to think about how to apply the technology.
Even at Amazon, I think it’s important to realize that the technology is not the format. The technology is the capability that enables the format. It solves a customer pain point – the checkout line – and opens many possibilities for deployment. Because Amazon has been testing it for over a year now, they have a significant lead in understanding the technology and practically experimenting with it. AiFi and their early retail partners need to get moving on testing the capabilities, learning from the test and iterating from there. Nothing is as valuable as actual experience.
KC: I also wanted to get you to talk a bit about Amazon and Whole Foods. While the immediate impact of the acquisition has been subtle - there hasn’t been a broad overhaul of the company (yet) - I’m unwilling to accept the argument advanced in some places that Amazon has been unable or at least tenuous in its approach to making changes at Whole Foods.
I’ve been arguing that while Amazon is much faster than most other companies, it also is deliberate and disciplined, and it knows the difference between strategic and tactical change. This isn't about being hesitant - this is about creating a battle plan and implementing it effectively and efficiently. Am I wrong?
TF: Amazon has never been tenuous in its approach to anything. I can’t imagine they’d use the Whole Foods acquisition, one of the most visible things they’ve done, to suddenly become hesitant in their desire to innovate on behalf of their customers. Remember, when Amazon made the acquisition, they acknowledged the similarities in customers and customer-focus between the companies. They said to not expect dramatic changes, at least it first. So, it would be illogical to expect them to make sweeping changes out of the gate.
Also, Amazon is new to stores. They don’t claim to know everything. They do know that they are going to relentlessly focus on serving customers, they are committed to the grocery business and will be using the Whole Foods platform to develop new ways of serving customers. Be it store-based shopping, Prime Now, other local delivery or store pickup, they are going to be disciplined in their approach to innovation and experimentation. You can see some of these deliberate changes with the integration of AmazonFresh and Prime Now, and offering Whole Foods delivery in certain market.
As they go, I can assure you that Amazon continues to work on the battle plan, testing and modeling like crazy, and will come out the other side with very innovative and effective approaches to the business. If I were a competitor, I would not sleep well at night unless I was confident that my company was doing the same.
The Conversation will continue…
- KC's View: