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In this month’s FSP Spotlight, we’re looking at how Amazon remains on track to leave no corner of the retail space untouched by its disruptive strategy.
Disrupting a new industry
First, let’s look at its acquisition of Wholefoods, a move that took many industry commentators by surprise; not only is it a tech company taking over a grocery chain, but because Amazon has a reputation for making smaller deals. This $13.7bn deal is Amazon’s first ever $1bn+ purchase. The acquisition seals Amazon’s long-term commitment to building out its grocery business, consolidating its efforts via Amazon Fresh and the introduction of brick-and-mortar stores.
Amazon’s expertise in distribution means both grocery delivery and "Click and Collect" is set to sky-rocket though experts do expect in-store innovations, such as live cooking shows, trend showrooms and personalisation. At the same time, while Amazon has kept its UK-ventures small-scale, experimental and mostly confined to London, further disruption of the UK supermarket sector – and “Amazon fear” is widely expected.
Real-world expansion
Close to Amazon’s strategy is how it uses Whole Foods stores to keep expanding its own successful third-party business, an area that generates significantly higher margins than items sold directly by Amazon. It’s anticipated that the deal will build on its bricks and mortar strategy, utilising the Whole Foods locations as local distribution points for food as well as other items, as well as capitalising on Whole Foods' organic private label brand.
The launch – albeit small scale – of real stores earlier this year has also strengthened the brand’s footprint. While bricks and mortar retail remains a marginal part of Amazon's business, benefits include boosting brand awareness and exposing customers to Amazon's Prime subscription service. Prime members get the online prices in the store, while non-members pay the list price for books.
Becoming “the best place to buy fashion online”
Fashion also remains a huge focus for Amazon and this year it seems closer to achieving its aim of being the “best place to buy fashion online”. So far in 2017, it has launched seven private label apparel brands, added its own lingerie line with cut-rate prices and announced an extension of its Alexa-enabled Echo product line specifically designed to take outfit photos and give style feedback. The company is also investing in its own fully automated clothing factory, a shipping company and physical stores, showing it means all-out war on the industry.
Shares of Amazon have gained 9.2% in the past three months, compared with the S&P 500 index gain of 3%.
So what’s next for Amazon? Having filed patents for a robotic fashion mannequin that can change dimensions to allow a shopper to see how clothing items fit on different sizes, and a ‘try before you buy’ services in the US, it is clear that Amazon has the potential to become a major player in the fashion market, and that in the long-run this could have an impact on traditional fashion retailers. Watch this space!
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