Amazon – If You’re Wondering What Amazon’s Retail Legacy Is, Transformation Is Key
A sea of packages at an Amazon logistics center. The online and digital giant transformed order … [+]
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While Tuesday’s news of Amazon founder and CEO Jeff Bezos transitioning in the third quarter to the role of executive chairman doesn’t signal a significant shift for the digital giant – he’ll continue to keep a keen eye on the business, and his successor Andy Jassy is steeped in the company’s culture – Bezos has been a driving force in some of Amazon’s most transformative ideas and technology for retail.
Amazon’s culture of innovation and test, fail and learn mindset has had a profound effect on supermarkets and competitors such as Walmart and Target, which have kept the digital giant in their sights while rushing to reassess and transform the online and digital sides of their businesses, kicking their technology games up a notch.
Amazon also disrupted big box retailers of single-classifications such as books, sporting goods, music and entertainment. In fact, Amazon transformed itself from a small bookstore whose meetings were held at then-larger competitor Barnes and Noble
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“Amazon is what it is because of invention,” Bezos said Tuesday in announcing the company’s fourth quarter financial results when net sales increased 44% to $125.6 billion, compared with $87.4 billion in fourth quarter of 2019, and his own career change. “We do crazy things together and then make them normal.
“We pioneered customer reviews, 1-Click, personalized recommendations, Prime’s insanely-fast shipping, Just Walk Out shopping, the Climate Pledge, Kindle, Alexa, marketplace, infrastructure cloud computing, Career Choice, and much more,” Bezos said, ticking off Amazon’s accomplishments. “If you do it right, a few years after a surprising invention, the new thing has become normal. People yawn. That yawn is the greatest compliment an inventor can receive. When you look at our financial results, what you’re actually seeing are the long-run cumulative results of invention. Right now I see Amazon at its most inventive ever, making it an optimal time for this transition.”
Deborah Weinswig, CEO and founder of global advisory and retail and technology research firm Coresight Research, warned retailers not to be complacent and let their guard down because Bezos is leaving day-to-day involvement in Amazon.
“This might come as a relief to all those retailers who wake up and tell themselves, I can finally take a break and catch my breath,” Weinswig said. “Really, there’s no break to be had. Jeff Bezos taught us that innovation is relentless and can come from anywhere, anytime. If it’s not Amazon, then it’s Walmart working on its next frontier.
“We’re seeing this at Nike
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“Amazon continually raises the bar and redefines what constitutes table stakes for the retail industry,” said Carol Spieckerman, president of Spieckerman Retail. “I expect Amazon to continue to keep its competitors on guard and to extend more tentacles, even as doing so increases the potential for having its wings clipped.”
Spieckerman was referring to more intense scrutiny of Amazon, expected by the Biden administration and Senators such as Elizabeth Warren. The U.S. House of Representatives’ Judiciary subcommittee on antitrust in October found Amazon’s online retail dominance to be greater than previously believed, accounting for 50% of the U.S. market. The digital giant is also being investigated for bullying vendors, and employees have been voicing concerns over their treatment by Amazon.
Forrester retail analyst Sucharita Kodali said that while drastic changes aren’t expected near-term, Jassy’s appointment could shift the trajectory of the company. “He’s an insider and has been part of the executive team forever,” she said, “But you wonder whether the strategic decisions will change. If you have a decision where there’s a dollar to spend on Amazon Web Services [which Jassy founded] or same-day delivery, the guy who ran AWS would be more likely to spend on the former.”
Amazon’s Alexa voice shopping assistant, launched in 2014, may have inspired Walmart’s Jetblack, launched in 2018 by Store No. 8, its ring-fenced technology incubator tasked with finding solutions for retailer’s future. The labor-intensive Jetblack was shuttered in February 2020 after losing money. When Jetblack in 2017 was first revealed, Walmart said the immediate goal wasn’t making money, which was a very Amazon-like point of view.
Amazon’s $119 annual Prime membership service continues to reverberate throughout the retail industry, along with its relentless push for speedier delivery times, which prompted Walmart to acquire Parcel, and Target to buy Shipt for $500 million, leaving players with less agility and fewer resources struggling to compete.
Retail experts view Walmart‘s new membership service as a way for the retailer to grow its online business and compete with Amazon for higher-income customers – the holy grail of shoppers.
Walmart in September introduced +, a $98 per year subscription plan that offers same-day free delivery on orders other than grocery, for which there’s a $35 fee. Unlike Amazon’s popular Netflix streaming service, Walmart + has no entertainment component, but, it provides a fuel discount, which Prime does not.
“Amazon has had a tremendous impact on retail,” said Kodali. “We know that [former CEO of Walmart
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Walmart’s 2016 $3.3 billion purchase of Jet.com, founded by Lore, was seen as a talent grab for his technology expertise and insight into Amazon, where he worked with Bezos.
“Marc Lore had an axe to grind with Amazon,” Kodali said, referring to Quidsi, the parent of Diapers.com, which Lore cofounded and sold in 2011 to Amazon, only to have Bezos shutter Quidsi in 2017, announcing that the site wasn’t profitable.
“There’s no question that Amazon had a big impact on Walmart,” Kodali said. “Lore helped Walmart play to its strengths such as grocery and curbside pickup. Marc tried a lot of experimental things like acquiring smaller brands such as Modcloth, Bonobos and Moosejaw. Some were better decisions than others, but net-net, if you look at Walmart’s stock price, Jet.com more than paid for itself.”
Walmart’s nearly 4,800 U.S. stores dwarf Amazon’s 530. The retail giant’s fleet was seen by some as a liability as consumers turned to the Internet, especially, during the pandemic, but Lore worked to integrate Walmart’s brick-and-mortar and e-commerce businesses, most recently testing and building local fulfillment centers staffed by bots and sales associates.
“This is a great time to look back at the influence that Amazon had, and will continue to have, on other retailers,” said Spieckerman. “Amazon modeled the diversification push that’s emerged as retail’s primary growth vehicle. Retailers have realized that they can’t survive by simply being places that sell stuff, nor can they grow solely by opening more stores.
“Amazon exemplifies platform thinking and the power of building synergistic ecosystems that include not only products and brands, but also solutions, services, content, media and much more,” Spieckerman added. “Amazon has built its brand, not through clever marketing, promotions or even category expertise, but purely through execution. This has challenged other retailers to go beyond window dressing and to acknowledge and address new realities.”
Unlike Walmart, which touts its environmental initiatives and charitable efforts, Amazon’s somewhat detached perspective may have shielded it from some scrutiny, Spieckerman said.
“The company has avoided touchy-feely messaging for the most part and hasn’t over-promised on social action,” Spieckerman said, although that’s made Amazon a target of environmental organizations. “At the same time, it’s created a compelling execution-based proposition that’s difficult for shoppers to quit once they’ve been onboarded. It’s yet another guard against backlash and customer attrition.”
