In the wake of the announcement by Amazon last week that it was to acquire Whole Foods in a $13.7 Billion deal that surprised many, one can only wonder what the long term plans of the two retailers really are. We do have some indications though that allow us to speculate on what could happen when the biggest e-commerce company in the world with a most innovative streak and one of the most successful brands focused on product quality and customer service join forces.
All things Amazon
It is perhaps diminutive by now to describe Amazon as an e-commerce company; although that's where the $136 Billion company (Amazon's 2016 revenue) had its beginning, by now, Amazon's business spans all things internet, all things cloud computing, and then some; the expansion into new business sectors or incorporation of innovative technologies has always come after concerted, dedicated efforts, often characterized by highly publicized partnerships (e.g. the Twitter partnership, the Kiva Systems or this latest Whole Foods acquisition) and massively successful outcomes i.e. increased productivity/efficiency, higher earnings and happy investors. But, is this latest Whole Foods acquisition such a surprise? My answer? Not really.
Amazon's moves have often been thought of as unexpected, but that's most likely due to the very secretive way Amazon ventures into new business or researches new technologies; having visited lab126, Amazon's research and development subsidiary best known for having developed Amazon's Kindle line of e-readers and tablets, I can testify to that: I never really saw lab126's interior, I was greeted by my contact at the door, we conducted our business meeting off site -but at least over very tasty lunch- and when I asked what else other than e-readers and tablets were lab126 interested in, I was informed that he didn't know and wasn't supposed to: he himself didn't even know what the person at the desk next to him was working on, so sharing strategic R&D goals wasn't something he could do at all.
This little snippet from my personal log goes to show the speculative nature of what is about to follow but, when it comes to speculation, this is very much, I feel, an educated guess that cannot be too far off mark from what's coming.
Go Robotics Prime Air
No, I am not just throwing words together in order to make an article subheading. I have essentially just given you Amazon's strategy in retail which is, put simply: "Remove all human error from the overall sales process". And that's both in physical retail stores as well as online ones. Granted, physical stores have not been part of Amazon's business model so far, but now, they are. And one of the biggest decisions an online retailer would have to make here would be: "Do I set up new stores when I can buy ready ones?" Assuming one can afford to buy ready-made stores, especially ones that already function at a more than satisfactory level of customer service (something that Whole Foods has always taken pride in), they can save the headaches of learning how to run a store from scratch.
Now throw into the equation Amazon Go, the prototype grocery store with one location in Seattle, WA currently: partially-automated, with customers able to purchase products without using a cashier or checkout station.
With Amazon Go in alpha testing and beta testing expected in 2017, it's not a far cry to imagine that Whole Foods stores will become some of the main stores to roll out the company's partially automated cashier-less/checkout counter-less store concept going forward.
With Amazon robotics working on rolling out autonomous mobile robots (AMRs) in Amazon's warehouses for order fulfilment and Amazon Prime Air being tested to deliver packages under 5lbs in record times (in fact, the Amazon Prime Air test site in Cambridgeshire UK, is very close to the offices of the IDTechEx headquarters!), Amazon is at the forefront of the innovations required in automating the sales process whether that is a physical sale or an online one.
The benefit is expected to be multi-fold: reduced costs for amazon by improving yields and reducing time taken to fulfill an order or time taken to go through a store for a customer, as a result improving the efficiency of the sales process, increasing customer satisfaction and thus offering premium customer service.
The concept of drone delivery is not unique to Amazon: it's an approach that's being tested by other e-companies as well; Google for instance, revealed in August 2014 that it had been testing UAVs in Australia for two years. The Google X program known as "Project Wing" aims to produce drones that can deliver not only products sold via e-commerce, but other items -such as emergency medicine for instance- as well, and all in a matter of minutes. Image source: Google X
For those of you that might feel that customer service is also about a warm welcome greeting or a smiling employee asking you if you found all that you were looking for, well... can robots smile in earnest yet...?
For more on the robotics industry see www.IDTechEx.com/research/robotics