发表于 2016-12-7 06:27:40
Amazon's Next Act: Amazon Go And Frictionless Shopping|
Dec. 7, 2016 3:25 AM ET|
6 comments |
About: Amazon.com, Inc. (AMZN)
Value, growth, contrarian
Farmhouse Equity Research
'Amazon Go' represents an enormous growth opportunity for Amazon.
Grocery retailers will be faced with hard choices.
Frictionless shopping will likely come to dominate other retail categories.
Amazon (NASDAQ:AMZN) released a video yesterday which introduced the world to its new advanced shopping technology and retail concept, which the company is calling Amazon Go. Any companies selling groceries at retail, including Wal-Mart (NYSE:WMT), Target (NYSE:TGT), Costco (NASDAQ:COST), Whole Foods (NASDAQ:WFM), Kroger (NYSE:KR) and thousands of convenience stores (just in the US alone), should take a moment and decide whether they can afford to disrupt their own business model or look for the nearest M&A exits. Those appear to be the only two choices: Invest in new technology or sell/merge while you still can.
What Amazon plans to do in grocery retail represents a true turning point in retail by taking what is arguably an unpleasant shopping experience and making it truly frictionless. How many grocery store retail sales are lost because the check-out lines are too long? How many shoppers decide not to go shopping at all, just because they dread facing long check-out lines? How much time is wasted standing in long grocery lines? If you give consumers a choice between shopping in a store that requires them to scan a bar code for a second on their smartphone, or stand in line for many minutes while a grocery store check-out clerk goes through the laborious process of scanning each item before completing the payment ritual, my bet is that they will move in droves to the former.
Amazon has a long way to go before claiming victory in the multi-trillion dollar grocery market, and significant obstacles remain. Yes, they need to find great locations; yes, they need to build brand new stores from the ground up; yes, they are entering a highly competitive market where margins on lots of products are already razor thin. What does Amazon really know about running retail stores? Is friction-less shopping such a big deal? These are all valid points, and worth considering. In my opinion, Amazon has the resources, technology, knowledge and intelligence to surmount these and other unforeseen hurdles.
The Wal-Marts and Safeways of the world won't go down without a fight, of course, but in my opinion the result is inevitable. Amazon is not just planning to build grocery stores, rather, the company is planning to build a frictionless retail selling experience. That technology will make their retail stores scalable in a way that no other brick and mortar stores can match.
If a thousand shoppers suddenly all show up at Albertson's at exactly the same time to buy potato chips that are on super sale for $0.10 per pound, the store would essentially shut down. There is no way they can handle that crowd. An Amazon Go store, however, assuming the technology being built is robust (which is a fair assumption given that Amazon powers the Web), would easily manage. They call it Grab and Go for a reason…
Let's look a few years down the road, and assume that Amazon builds out its grocery store concept across the US. How much business will they have taken from incumbent competitors? Perhaps they manage to take only 10%. Wal-Mart could take a 10% hit and still be OK, but can grocery chains, supermarkets and convenience stores? Unless those companies invest and re-build their stores to compete on an equal footing, which seems like it would be hard to do given that Amazon is a premier technology company, the retail landscape will start to look radically different.
Which other companies should be looking over their shoulders right now? In my opinion, dollar stores would likely be the next logical market, followed perhaps by office supply stores, drug stores, pet stores, and wholesale clubs (e.g. Costco), to name just a few. Any retail store in business right now as a standalone concept in which consumers don't need to interact with salespeople to make a purchase (which, for now, leaves out furniture stores and department stores) would appear to be ripe for the picking.
Yes, it's hard to pull the trigger on Amazon and buy the stock at these lofty valuations, but I would rather own Amazon today, knowing that the next few years portend tremendous growth opportunities, than to own any retail grocer, knowing that the next few years will likely require massive investment in technology infrastructure just to stay in the game.