Given that Amazon is an e-commerce company focused on fast, friction-less delivery, there are few better ways to examine digitalization and the supply chain than to look at Amazon. According to company executives, Amazon is singularly focused on consumers answering affirmatively to the following two questions: “Do you have what I want, and can you get it to me when I need it?” (Robischon, 2017). Amazon cares about digitalization and supply chain not only because they have been critical to the company’s success, but also because they are the source of the company’s core value propositions.
In my mind, Amazon is focused on 3 main themes for supply chain innovation: the interaction of digital and brick and mortar, data analytics, and automation in fulfillment. Amazon’s focus on the interaction of digital and brick and mortar has been made obvious by the sheer number of brick and mortar concepts they are testing and/or building out. Amazon’s largest move into brick and mortar was the acquisition of Whole Foods this year, but there are several other initiatives in the works. Amazon is currently testing a concept called “Amazon Go,” a grocery store with “no lines and no checkout.” Customers can check into the store with an app, add items to their digital shopping cart by picking them off the shelf, and pay automatically by walking out of the store (Amazon.com, Inc, 2017). Other concepts include “Amazon Books” and the “Amazon Treasure Truck” (Amazon.com, Inc, 2017), (Amazon.com, 2017). All of these ventures into brick and mortar give consumers immediate access to product without having to wait for delivery, create a space for consumers to touch and feel Amazon products, and provide valuable data to Amazon about consumer shopping behavior (Petro, 2017), (Taylor, 2017).
Amazon has been and will continue to be focused on data analytics to inform the supply chain. Amazon’s digital platforms allow Amazon to collect a wealth of data about their customer’s shopping habits. Amazon’s goal is not only to know what their customer wants, but to predict that need in advance. For example, Amazon has a patent on predictive shipping in which a product is sent to a warehouse to anticipate a customer’s order so that it can be delivered faster (Lomas, 2014). Also, over 25% of Amazon’s revenue is from cross-selling or up-selling techniques based on past customer browsing and purchase history (Cohn, 2015). As more consumers shop through Amazon.com and other channels (Alexa, dash buttons, new brick and mortar locations), better data can inform the supply chain to get the right products to customers faster.
Amazon is also focusing on automation to optimize the supply chain. One example is Amazon Prime Air, a delivery system that will allow Amazon to deliver packages under 5 pounds in 30 minutes or less using drones (Amazon.com, 2017). It could be a more scalable way to build Amazon Prime Now, which has so far been in select geographies with a limited product assortment.
Amazon has been pushing the boundaries of supply chain innovation and has taken the digitalization megatrend head on. However, I was surprised to read that one change Amazon has made to Whole Foods since the acquisition is to lessen the amount of local products offered in stores (Taylor, 2017). Localization is a trend that has been widely discussed among academics and business people alike (the HBR posted an article about localization back in 2006) (Rigby, 2006). In the wake of digitalization, localization has become even more important. Amazon, with its focus on customer shopping behavior as well as its function as a marketplace is positioned well to ride the wave of this trend. Amazon could sell local items and allow consumers to discover these items through its marketplace. It could quickly respond to customer demand for these items through data analytics, and deliver products to the customer using its well established fulfillment network.
Although Amazon seems to be well positioned for the future, it is yet to be seen how widely Amazon will expand its brick and mortar stores and how successful they will be at merging the digital with the physical shopping worlds. Will they struggle with the same difficulties that other brick and mortar retailers face or be savvy enough to bring together the best of both the digital and physical channels for a seamless customer experience? Amazon’s continued success will also be affected by competitive retailers’ responses to the current environment. Will existing retailers effectively react or will Amazon take over retail as we know it?
Amazon.com. (2017). Prime Air. Retrieved from Amazon: https://www.amazon.com/p/feature/6grqshfrw4gz7tv
Amazon.com. (2017). Treasure Truck. Retrieved from Amazon: https://www.amazon.com/b?node=15020057011
Amazon.com, Inc. (2017). Amazon Books. Retrieved from Amazon: https://www.amazon.com/b?node=13270229011
Amazon.com, Inc. (2017). Amazon Go. Retrieved from Amazon.com: https://www.amazon.com/b?node=16008589011
Cohn, C. (2015, May 5). A Beginner’s Guide To Upselling And Cross-Selling. Retrieved from Forbes: https://www.forbes.com/sites/chuckcohn/2015/05/15/a-beginners-guide-to-upselling-and-cross-selling/#6ad7826e2912
Lomas, N. (2014, January 18). Amazon Patents “Anticipatory” Shipping — To Start Sending Stuff Before You’ve Bought It. Retrieved from Tech Crunch: https://techcrunch.com/2014/01/18/amazon-pre-ships/
Petro, G. (2017, August 2). Investing. Retrieved from Forbes: https://www.forbes.com/sites/gregpetro/2017/08/02/amazons-acquisition-of-whole-foods-is-about-two-things-data-and-product/
Rigby, V. V. (2006, April). Localization: The Revolution in Consumer Markets. Retrieved from Harvard Business Review: https://hbr.org/2006/04/localization-the-revolution-in-consumer-markets
Robischon, N. (2017, February 13). Most Innovative Companies. Retrieved from Fast Company: https://www.fastcompany.com/3067455/why-amazon-is-the-worlds-most-innovative-company-of-2017
Shen, L. (2017, May 15). Finance. Retrieved from Fortune: http://fortune.com/2017/05/15/amazon-stock-20-years-ipo/
Taylor, K. (2017, September 21). Here are all the changes Amazon is making to Whole Foods. Retrieved from Business Insider: http://www.businessinsider.com/amazon-changes-whole-foods-2017-9/#whole-foods-has-already-cut-prices-1