JOIN USA level playing field for retailers
Thanks to its ugly spat with book publishers, Amazon has lately been cast as the abominable boogeyman of commerce.
As hundreds of authors took up arms against the giant, The New Republic declared in a cover article this fall that “Amazon Must Be Stopped,” insisting that the company’s unbounded retail ambitions would end up “cannibalizing the economy.”
But there’s another theory about Amazon’s future, one for which evidence began to mount this year: Despite fears of Amazon’s growing invincibility, the company’s eventual hegemony over US shopping is not assured. It might not even be likely.
That’s not just because investors began to question the company’s aggressive spending this year, or because its big new thing, the Fire Phone, turned out to be about as unwelcome as the flu.
Amazon may face a deeper problem. Like many of the local and big-box retailers it has displaced in the past decade and a half, Amazon could itself become increasingly vulnerable to the threat of technological upheaval.
The key to its vulnerability is the smartphone, a device whose scope and significance founder Jeff Bezos has not yet managed to corral.
Phones have already radically altered both how Americans shop and how retail goods move about the economy, but the transformation is just beginning - and it is far from guaranteed that Amazon will emerge victorious from the transition.
Phones are at the heart of the service offered by Postmates, one of several startups that are working with retailers and helping to change shopping experiences.
“Everything that we’re doing is anti-Amazon,” said Bastian Lehmann, the co-founder of Postmates.
Postmates runs a network of couriers who, like Uber drivers, are dispatched by phones to deliver food, apparel, toothpaste and other goods from local stores in 18 US cities. The company recently announced a plan for retailers to build Postmates’ technology into their own technology systems, a way to give small stores the kind of logistical efficiencies that were previously available only to giants like Amazon.
As local retailers adopt such mobile innovations, customers will be able to search stores’ inventories, purchase goods for same-day delivery, and navigate and search for help and reviews inside a crowded store. None of these technologies pose an existential threat to Amazon, but by giving physical stores some of the conveniences that Amazon has long had, they may limit its potential reach.
“We want to use the city as our warehouse instead of building a warehouse outside the city,” Lehmann said. “We want to be part of a city versus saying, 'Here’s a way that you can save $2 (Rs 126) on an item, but nobody in your city earns a dime, but now you have a cheap DVD player - congratulations!'”
The San Francisco Bay Area has become a hotbed for some of the most innovative retailing startups.
With Instacart, you can get groceries delivered instantly from big and small supermarkets. With Google’s Express delivery service, you can get household goods from big-box stores delivered on the same day you order. The app Curbside lets users order items from Target and have them ready when they drive up to a store. And with Postmates, it is possible to order takeout, and pretty much anything else, and have it delivered directly very quickly.
These services all have in common speed and convenience: Because they route purchases from stores, they can often shuttle goods to buyers faster than they are available from Amazon. The prices are even competitive with Amazon, which delivers most of its products, even groceries, from warehouses that are a few hours away.
And speed changes everything.
I used to buy just about everything from Amazon; in 2012, my household recorded 141 purchases from the retailer, not including digital items like Kindle books. Many of these were for staples like paper towels and baby diapers. But when you run out of diapers, you can’t really wait a day or two to get them.
Now, with Instacart and Google Express, I can search for these staples at nearby stores and get them within just a few hours of my purchase. The more I used these faster services, the less I used Amazon.
In 2013, my Amazon orders slipped to 115, about 20 percent down from the previous year. This year, my Amazon purchases will be down again - I’m at 90 for the year, down by about a third from my 2012 peak.
Am I an outlier? Almost certainly, given that Amazon’s overall sales have continued to grow at a fast clip over the past two years.
And none of the startups that are challenging Amazon expect to meaningfully slow its growth in its core categories. But they do see opportunities in new areas, like food, medicine, apparel and other categories were Amazon is not yet indomitable. So far, these new ideas have seen rapid growth.
Instacart is poised to generate more than $100 million in revenue in 2014, 10 times what it did in 2013, according to the company. The company has reportedly been valued by investors at $2 billion, and it is looking to expand into other categories beyond groceries, said its founder and chief executive, Apoorva Mehta.
To Mehta, the biggest advantage of Instacart’s model is that it co-opts local retailers rather than turning them into enemies. Stores that use Instacart have seen sales go up by 10 percent annually, he said; that’s huge in the grocery business, where sales increases are often measured in the single digits.
“We’re the retailer’s best friend,” Mehta said.
Maybe so.
“We’ve found that about half of the people who are buying with us via Instacart said they would not have shopped with us if they did not have this option,” said Jackie Donovan, the vice president for marketing at Fairway Market, the New York-based specialty grocery store.
Amazon has been investing vast sums in speeding up its delivery service, and it has been experimenting with ideas that mimic some of the startups, including using taxi-hailing apps to deliver goods.
But the challenge for Amazon is that it may not be able to do all that it wants to do to take over the nation’s retail landscape.
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