It may seem like yesterday, but Amazon first began disrupting the retail status quo nearly 25 years ago. As one of the world’s largest online retailers, it has set ecommerce standards. But it now has its sights set on stores.
With Amazon’s move into offline retail set to be a game-changer, we asked Retail Technology publisher, Miya Knights to look at the technology driving no click retailing.
Amazon’s ascendancy has been predicated on focusing less on what it sells, but how it sells it; and, on bringing unprecedented levels of speed, choice, convenience and accessibility to shopping through tech adoption.
Today, more than half of the world’s population is using the internet. Digital and mobile technologies inform every stage of the shopping journey – from research, browsing and discovery, right through to checkout.
Amazon has been at the forefront of technology innovation and, driven by its principles, its success is founded on giving customers what they want, “even when they don’t yet know it,” as Jeff Bezos said in 2017.
Amazon’s Leadership Principles
“Customer obsession” is the first of its 14 Leadership Principles. “Ownership” that prizes long-term thinking is second and “invent and simplify” is third, accepting it may be “misunderstood for long periods of time”.
It is this will to innovate, coupled with the means to fund unprecedented levels of R&D provided by shareholders trained to be patient, that has led it to become a driving force behind “frictionless retail”.
This has allowed it to capitalise on three major branches of consumer-led technology development:
- Ubiquitous digital connectivity,
- Pervasive computing interfaces and
- Autonomous computing capabilities.
Consider, for example that, while we’ve reached a tipping in the global population of internet users, half of the world’s population will access the internet via mobile by 2020, where Amazon is already a world leader in shopping search.
ComScore’s 2017 US Mobile App Report also found more than a third of 18-to-34 year olds said Amazon was the number one app they couldn’t live without, ahead of Gmail, Facebook and millennial phenomenon, YouTube.
Using technology to drive innovation
But it wasn’t always this way. Looking back to 1994, Amazon wanted to exploit the greenfield opportunity of the selling over the internet. Having initially limited itself to the books, for their relatively simple merchandising and fulfilment requirements, it opened its storefront to other merchants as a marketplace. But it lacked the tech to scale.
As my co-author Natalie Berg and I highlight in our new book about Amazon, Amazon is a tech company first and a retailer second. So, its major milestones have been enabled by using technology to simplify and automate the shopping process.
Take for example its “1-Click” patent, first granted in 1999 to register billing, payment and shipping information details in advance of adding products to a basket and checking with “one click”.
Some doubted if the function was worthy of a patent at all. But its value to Amazon, as demonstrated by its stringent defence of it when it sued its once arch-rival bookstore Barnes & Noble for IP infringement, extended far beyond licensing revenues.
Despite expiring in 2017, the 1-Click patent afforded the company a significant first-mover advantage for nearly 20 years. It also gave it a foothold to sell its competitors other tech-based services, such as Fulfilment By Amazon (FBA), which was introduced in in 2006, and Pay with Amazon, launched in 2013.
The speed with which consumers embraced 1-Click checkout was also significant because it clearly indicated the importance of speed and convenience as retail differentiators. So, Amazon built on this advantage in 2015, by offering rapid delivery with launch of Prime.
Invent and simplify
2015 was also a watershed year in Amazon’s history for other reasons that support our “tech first” premise, founded on its “invent and simplify” principle. Twelve years after it began to resell the cloud computing tech it built to scale its own business, it revealed just how profitable Amazon Web Services (AWS) had become. It is now the single greatest revenue contributor and profit generator.
AWS not only validates the “tech first” argument, it has also provided the foundation for all of the other customer-facing innovation aimed at eliminating friction from the shopping journey.
It is unlikely that Amazon would have had the means, let alone the sophisticated technical capabilities required to make sure it did not rest on its 1-Click, Pay with Amazon, and Prime, followed by Prime Now, laurels without AWS.
As, Amazon’s marketplace and AWS businesses benefitted from growing consumer adoption of increasingly ubiquitous internet access, it was able to scale its core business in line with this growth and develop the technology-enabled tools and infrastructure needed to support and foster further expansion.
The Flywheel effect
This, in turn, resulted in Amazon’s flywheel effect, where three key, complementary business pillars of marketplace, Prime and AWS drive greater merchant and customer lock-in, along with higher revenues.
The centrifugal force of Prime, for example, is well known for encouraging loyalty by bundling free rapid delivery, streaming media access and unlimited photo storage together, to name just a few of its “perks”.
In addition, just as there would be no Amazon without its efforts to sell over the internet, there would be no apps or “Alexa” voice functionality if it hadn’t understood how important a role mobility would have to play in enabling more seamless shopping experiences.
Even though it wasn’t able to build on its Kindle e-reader success with its ill-fated Fire smartphone, (shelving it in 2015), the lessons learned helped Amazon to apply pervasive mobile interfaces, such as touch and voice, to the removal of even more friction from online shopping experiences.
This became apparent with the launch of Amazon Dash buttons – again, in 2015 – as the apotheosis of its 1-Click concept. Prime customers can place Dash buttons around their homes for dedicated and seamless product re-ordering.
Later, Amazon has extended the AI-based autonomous computing expertise it has brought to bear with the heavy use of robotics in its warehouses, to the auto-replenishment functionality it has also baked into its Alexa assistant-based Dash Wand or Echo devices.
No Click checkouts
Finally, and most recently, the Just Walk Out technology that powers the Amazon Go store experience brings the technology drivers it has applied so well online to bear in a physical store scenario.
But, by offering the prospect of a checkout process that has seen the online giant move from one click online to “no click” whatsoever offline, it remains to be seen whether this latest mobile app, AI and “computer vision,” video-tracking innovation will be enough for it scale and grow its tech-based flywheel proposition in the real world.
About the author
This guide has been written exclusively for ByteStart by Miya Knights, Eagle Eye Head of Industry Insight, Retail Technology publisher, and co-author of Amazon: How the World’s Most Relentless Retailer will Continue to Revolutionize Commerce published by Kogan Page on 3 January 2019.
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