Unboxing Amazon's ambitions

Unboxing Amazon's ambitions

The company is quietly targeting India for new brick-and-mortar grocery stores.

Unboxing Amazon's ambitions

Two weeks ago in Palm Springs, California, Jeffrey P Bezos, the chief executive of Amazon, climbed into the cockpit of a 13-foot robot and began flailing his arms as if warming up for a workout, causing the robot’s enormous appendages to mimic his movements.

“Why do I feel so much like Sigourney Weaver?” Bezos said, referring to the actress who wore a mechanical suit in a climactic battle in the 1986 movie “Aliens.”

The intimate audience of entrepreneurs and academics, attending an Amazon conference on robotics and artificial intelligence, chuckled. Later, Bezos posted a photo on Twitter of himself in the suit with a more menacing air, the robot’s arms raised as if about to deliver a bone-crushing bear hug.

For years, retailers have been haunted by the thought of Amazon using its technological prowess to squeeze them into powder. That battle has mostly played out on Amazon’s home turf, the world of online shopping. Now the fight is coming directly to retailers on actual streets around the globe, where Amazon is slowly building a fleet of physical stores. And while most of the attention has been focused on Amazon’s grocery store dreams, the company has a more ambitious collection of experiments underway.

If those experiments work — and there is no guarantee of that — they could have a profound influence on how other stores operate. Over time, they could also introduce new forms of automation, putting traditional retail jobs in jeopardy. At the same time, locating those stores close to customers’ homes could also help Amazon further its ambitions of delivering internet orders within hours.

The company is exploring the idea of creating stores to sell furniture and home appliances, like refrigerators — the kinds of products that shoppers are reluctant to buy over the internet sight unseen, said one of several people with knowledge of the discussions who spoke on condition of anonymity because the plans were confidential. 

These would not be your average Home Depots: Amazon has considered using forms of augmented or virtual reality to allow people to see how couches, stoves and credenzas will look in their homes, the person briefed on the discussions said. Amazon is also kicking around an electronics-store concept similar to Apple’s retail emporiums, according to people familiar with the discussions. These shops would have a heavy emphasis on Amazon devices and services such as the company’s Echo smart home speaker and Prime Video streaming service.

And in groceries — a giant category in which Amazon has struggled — the company has opened a convenience store that does not need cashiers, and it is close to opening two stores where drivers can quickly pick up groceries without leaving their cars, all in Seattle.

Overseas, Amazon is quietly targeting India for new brick-and-mortar grocery stores. It is a vast market, and one still largely dominated by traditional street bazaars where shoppers must wander from stall to stall haggling over prices and deliberating over unrefrigerated meat sitting in the dusty open air. Amazon’s internal code name for its India grocery ambitions: Project Everest.

It is possible that some of the store ideas will never see the light of day. Groups within Amazon are often encouraged to come up with zany initiatives (this is the company that popularised the idea of drone deliveries). Many ideas are chucked out after deeper scrutiny by executives. Amazon declined to talk about any stores it has not announced publicly.

“We are always thinking about new ways to serve customers, but thinking is different than planning,” said Drew Herdener, an Amazon spokesman. Despite Amazon’s internet retailing success, over time it has become clear that there is a lot of shopping that people prefer to do in person. The most glaring example is groceries — the mother of all shopping categories, with about $770 billion for the supermarkets represented by the Food Marketing Institute, a nonprofit group that includes the majority of such stores in the US.

After pouring resources into an online grocery service, AmazonFresh, for almost a decade, the company has made only modest progress. According to people familiar with the workings of the company’s grocery business, it has struggled to operate it profitably, leading to a slow rollout of the service in new locations.

One big desire many customers have is that they want to see fresh fruits, vegetables and meat in person before buying them. The relatively high cost of home delivery — Amazon charges $15 a month for its Fresh service, on top of a $99 annual Prime membership — is another barrier.

Market value
Joe Thompson, a former general manager in Amazon’s retail business, sees physical retail as key to Bezos’ outsize ambitions for the company. “I can’t help but feel that, in Bezos’ mind, he wants to be the first trillion-dollar valuation company,” said Thompson, who is now an executive at BuildDirect, an online home improvement store. To do that, he said, Amazon would have to “crack” a couple of “completely underpenetrated markets online.” Amazon’s current market value is bobbing around $400 billion.

A few miles away from its other Seattle stores, on the ground floor of one of its many office towers in the city, the company is testing Amazon Go, a convenience store concept stocked with beverages, sandwiches and prepared meals, which are put together by chefs in a kitchen that is visible from the street.

The retail industry has been captivated by Amazon Go’s technology since the company unveiled the store late last year. The store uses a combination of sensors and artificial intelligence to automatically detect the food items shoppers remove from shelves, so they can leave the store without visiting a cashier — the way customers do when they bolt from an Uber. “Amazon is wonderful at frictionless commerce,” said Timothy Laseter, a professor at the University of Virginia’s Darden School of Business.

While Bezos was known for coining the motto “Get Big Fast” in the early days of Amazon, the company’s plans in physical retail could be better described as “Get Big Slow.” Some reports have said Amazon has discussed building as many as 2,000 grocery stores. But that figure was floated mainly as a hypothetical to consider the impact on Amazon’s supply chain, not as a goal that was currently under serious consideration, a person familiar with the discussions said.

India could represent another big market for Amazon in physical retail. The company, which has vowed to spend billions of dollars on its efforts in the world’s second-most populous country, recently sought approval from the Indian government to open online and physical food stores in the country, The Economic Times reported in February.

According to a person familiar with Amazon’s India grocery efforts, the company hopes to open its first Indian grocery store in Bengaluru. In a statement, Amazon said the company was excited by the Indian government’s efforts to encourage foreign investment in a “stronger food supply chain.” 

“We have sought an approval to invest and partner with the government in achieving this vision,” Amazon said.