Amazon Go venturing into Traditional Retail is an HBR case study based on analyzing entry into new markets. The case can be analyzed from the light of new product development or from a strategic point of view. The Exact HBR Case can be found here. The Amazon Go venturing into a Traditional Retail Case can also be analyzed from the point of view of constrained resources and management’s understanding of the environment to venture into a new business.
Amazon Go venturing into Traditional Retail Question 1: Were Amazon’s diversifications through Amazon Go and Amazon Elements appropriate, given the company’s resources and capabilities? Was such diversification a risky strategic move?
Given the resources and capabilities that Amazon possesses, it was reasonable for the company to diversify its operations by launching Amazon Go and Amazon Elements.
Since the beginning, Amazon has focused on providing customers with outstanding customer support in addition to services and goods that ultimately change the way customers buy products in their day-to-day lives. When considering Amazon, the effectiveness of its supply chain, its research and development team, its focus on the customer, and its highly efficient marketing strategies are its competitive advantages.
These strategic advantages play a critical part in successfully diversifying the business through online and offline sales, as Amazon has diversified into Amazon Go and Amazon Element. Online and offline sales account for 96% of Amazon’s revenue combined in 2016.
Amazon has a significant online presence to market offline retail sales because of the size of its customer base, which resulted in digital revenues of $71.8 million in 2017, followed by Walmart in second place at $13 million. Walmart was in the position of third place in 2017. In addition, Amazon will use the information it has gleaned from its customers’ online shopping behaviors to direct marketing efforts toward those customers.
Amazon was not a conventional retailer before the market for brick-and-mortar stores began to decline, so the company’s diversifications were a risky move. In addition to the infrastructure required for the operation of the automated checkout system, However, because Amazon has such strong brand recognition, it was simple to get the word out about these new products, and customers trusted Amazon’s ability to perform well in all aspects of its business. In addition, the Amazon Go market is only available to customers with an Amazon Prime subscription, which immediately reduces the size of their existing customer base.
However, if the overall price of an Amazon Prime membership were lowered, Amazon would be able to capitalize on its existing online customer base. This, in turn, would result in an increase in the number of customers who utilize particular Amazon Prime services, such as Amazon Go. Amazon Go venturing into Traditional Retail Case tries to answer the question.
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Amazon Go venturing into Traditional Retail Question 2: Can Amazon reproduce its online retail success in offline retail segments? Will it be able to become one of the biggest offline retail players?
Amazon is able to replicate its success in online retail in the offline retail space thanks to the competitive advantages it possesses in the areas of supply chain quality, research and development, customer centricity, and its marketing plans. In addition, Amazon has a strong brand image, and they are continuously working to improve and expand their public relations, both of which help propel the offline market.
With the cutting-edge point-of-sale system from Amazon that no other grocery store actually possesses or even fantasizes about having one day. They are able to reduce employee expenses in this way as a result of the high level of customer loyalty they enjoy as well as the innovative ways in which they make shopping more straightforward and hassle-free. Amazon has the potential to and will be able to establish itself as a traditional retail location.
Additionally, because Amazon Prime members are required to pay an annual membership fee, this demonstrates a sense of consumer loyalty, which will assist in the growth of revenue in the offline market. The introduction of Amazon Go and the technological advancements it brings to the brick-and-mortar retail sector will continue to simplify and expedite the shopping experience for customers, saving them time in the process.
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Amazon Go venturing into Traditional Retail Question 3: As the first mover in its shopping technology, will Amazon Go be able to succeed in the long term?
When Amazon Go was first conceived, its marketing slogan was “No lines, No Checkout, Just Grab and Go.” Amazon, as a corporation, has traditionally discovered a way to generate one-of-a-kind and value-adding customer experiences by maintaining its position of preeminence in its industry. However, Amazon is expanding into a new offline market with the help of its newly developed shopping technology. This new market may turn out to be quite distinct from Amazon’s online market.
Due to the fact that Amazon was the first company to enter the retail space that was powered by technology, the company actually has a niche market that, at least for the time being, has effectively eliminated the red ocean. Additionally, Amazon is a company that thrives on strategic creativity and research and development; as a result, this technological advancement in the shopping industry has put competitors in the lead, but only for the time being. Because of this new shopping technology, Amazon will eventually have a greater number of Prime members, which will make the company’s long-term success somewhat simpler.
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Amazon Go venturing into Traditional Retail Question 4: Being the first mover in “check-out free” convenience stores, how can Amazon Go maintain its competitive advantages in the long term? How can Amazon avoid failures such as the diaper brand it introduced in 2014 and make Amazon Elements successful? How should Amazon differentiate the products it offers via Amazon Elements from the products of other suppliers on its platform?
Amazon Go is able to keep its advantage in the market despite the fact that other stores will undoubtedly catch up with it in terms of the technological aspect of store operations by maintaining a very high level of synergy between the online and offline platforms.
- Activities such as ordering a product online and picking it up in a store offline, as well as viewing a product in a store before purchasing it online, can help users become significantly more receptive to using Amazon Go.
- The value proposition of Amazon’s in-house manufactured goods needs to be clearly differentiated from those of competitors.
A strategic agreement needs to be reached with each and every one of the suppliers in order to reduce the amount of product duplication that is being offered.
– Future Customers who shop at Amazon Go may have access to special offerings in the form of technological innovations such as drone delivery.
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Amazon Go venturing into Traditional Retail Question 5: Could Amazon’s offline retail marketing concept be developed globally?
It’s possible that Amazon’s offline marketing efforts around the world will face some production limitations. Amazon has always conducted all of its business online, which leads one to believe that the company is only subject to import taxes on its wares because it obtains its supplies from vendors located in other countries. If Amazon plans to open traditional retail stores in other countries, it should pay much more attention to the laws and regulations that govern physical presence in those countries.
It is possible that it could be developed in the UK due to the high level of brand loyalty that Amazon enjoys there; however, there are other countries such as China that have Alibaba and Amazon is not the leading retailer in those countries. In addition, there is a cultural component that is brought into play when establishments similar to supermarkets are established in other nations.
The manner in which individuals enjoy going shopping varies greatly from nation to nation, and outside of many western countries, Amazon Go does not fit the profile of the typical shopping experience. Amazon Go’s business model is based on the concept of convenience. It’s possible that consumers are more concerned about the cost of living in other countries than the comfort factor. When compared to the online retail space, the offline retail market has a significantly larger number of potential obstacles and risk factors to take into consideration, which may reduce their chances of global expansion.
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Amazon Go venturing into Traditional Retail Question 6: Was Jeff Bezos the right person to lead the company in facing the challenges of new offline retail ventures?
Jeff Bezos was the right person to lead Amazon at the time when the company was having trouble competing in the offline retail space. Throughout his career, Bezos maintained his reputation as an innovator and market disruptor, which is essentially what Amazon sought to accomplish in the midst of these challenges.
The fact that Jeff Bezos had a proven track record and a clear vision for his future enabled him to exude an air of self-assurance, which ultimately led to the creation of brand awareness. If Amazon had attempted this venture with a different leader at the helm, the company’s level of self-assurance and creativity, both of which eventually contributed to the company’s success, would not have been the same.
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Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page