When Amazon.com launched in 1995, it was with the aim “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, …[at] the lowest possible prices.” 

Essential Retail looks at how it is doubling down on this hugely ambitious mission statement

1. Creating an ecosystem that meets people’s everyday needs.

Customer obsessed, data-driven retailers will thrive in 2018, according to a new Forrester report. “In a world of hyperadoption — and hyperabandonment — the key to successful retailing in 2018 is obsessing about customer experience,” it says. “Retailers' greatest hindrance to executing on this vision isn't a lack of will — it's their siloed organisation structure that makes it next to impossible to get a holistic customer view or to craft the right products and services.”

Few, if any, are more obsessive than Amazon, which has a first-mover advantage over traditional players, as its technology systems have been designed from scratch, without various legacy issues, indeed legacy thinking, to worry about. And it is ruthlessly pressing home that advantage. Take, for example, its work around Amazon Prime (more on which later). And Alexa through Echo and Dot, not forgetting Dash.

Its foray into voice commerce is helping the company nab customer relationships from other retailers. To put this into context, a new study from Juniper Research finds smart speakers such as Amazon Echo, Google Home and the Sonos One will be installed in over 70 million US households by 2022, reaching 55% of all homes. Total installed devices will exceed 175 million. Voice assistant devices across all platforms, smartphones, tablets, PCs, speakers, connected TVs, cars and wearables, will reach 870 million devices in the US by 2022, an increase of 95% over the 450 million estimated for 2017.

Throw in Amazon Music and Fire TV and various other services, and Amazon is growing an ecosystem which includes – but at the same time goes far beyond – food and grocery.

2. Delivery and convenience: pushing the boundaries

Amazon has a sprawling logistics and delivery operation that is continually expanding. According to Consumer Intelligence Research Partners, Amazon Prime, which launched in 2005, currently has 90 million US members, who spend about $1,300 on average per year, compared to an estimated $700 per year for non-members. Whilst Fresh Pickup has been launched in two Seattle locations. The service is free for Prime members with no minimum order size. Orders can be ready for collection in just 15 minutes and employees load groceries directly into shoppers’ cars.  

“As the first player to introduce one-hour delivery in the UK, and with Fresh Pickup offering a 15-minute time slot in the US, Amazon is really pushing the boundaries when it comes to delivery and convenience,” says Toby Pickard, senior innovation and trends analyst, IGD.

“It also made its first drone delivery on 7th December 2016 to a customer in Cambridge, as part of the testing for the Prime Air delivery system, which is looking to achieve 30-minute delivery.”

Prime members are also eligible to access a smaller range of fresh, chilled and frozen items through Amazon.co.uk's Prime Now app service. This offers one-hour delivery or free delivery within a choice of two-hour same-day delivery slots to customers in London, Hertfordshire, Surrey, Portsmouth, Birmingham, Manchester, South Yorkshire, Liverpool, Leeds, Newcastle, Glasgow and their surrounding areas. Prime members in selected postcodes in London and Hertfordshire also benefit from over 10,000 additional products from Morrisons, chemist John Bell & Croyden and Spirited Wines.

A year after first coming to the UK, Amazon Fresh is now available in 302 postcodes across London and the South East of England. One-hour delivery slots are available from 7am to 11pm, seven days a week. Customers in selected postcodes have three different options for same day delivery, including 10am for 2pm delivery, 12pm for 5pm delivery and 4pm for 8pm delivery.

3. Squaring up to Walmart via acquisitions and a store network

Walmart and Amazon have been exchanging some big blows, in the battle for convenience dominance. The latter has acquired Whole Foods, which has 456 stores across the US, Canada and the UK, in an all-cash transaction valued at approximately $13.7 billion.

“The big blow from Amazon was the acquisition of Whole Foods given 50% of Walmart’s sales are food – this one must have hurt Walmart especially given the big price cull that followed on products,” says Bhavesh Unadkat, principal consultant of retail customer engagement at Capgemini Consulting. “Although Walmart is focused on the value food market and Whole Foods the higher end, there is a big middle that are both are chasing the biggest piece of.”

Both brands are embracing omnichannel, enabling shoppers to shop seamlessly anywhere, anytime, he adds. “The interesting difference is Walmart has a huge store network and is looking to grow its online presence, whereas Amazon has the online presence and is looking at how it can grow its offline footprint to converge its offering. Who would have guessed Amazon would have ended up with physical stores? 

"Walmart announced Scan & Go where customers can scan products and checkout via an app. Amazon won this battle by announcing Amazon Go where you do not need to scan, you just drop your products into a bag and walkout. Meanwhile, Walmart recently trialled a programme getting their employees to do deliveries on their way home. This is impressive and something Amazon could not compete with.” 

Amazon has also completed its purchase of Middle Eastern online retailer, Souq.com, for a reported $580 million. This has operations in UAE, Saudi Arabia, Kuwait and Egypt and offers 8.4 million products across 31 categories including food and beauty.

“Amazon is present in 11 global markets. Amazon India will invest $500 million to build a food supply chain,” says IGD’s Pickard. “Currently, Amazon operates as an online marketplace in India, and in July it was confirmed that it could start to sell groceries directly to Indian shoppers. It has also confirmed its plans for retailing in Australia, and Amazon Japan has expanded its Prime Now service with food and cosmetics. Amazon Fresh has also launched in parts of Berlin, Potsdam and Hamburg and in March, Amazon Prime launched in Mexico.”

4. Innovating through technology

Amazon’s market capitalisation is approximately $535 billion, which is around $235 billion more than the top eight retailers in the US. And unlike Walmart, it is able to run its retail operations at a near or outright loss, with the understanding that it keeps growing rapidly. So, it has lot of cash to play with and to invest in the likes of machine learning, voice recognition and drone technology. It recently opened a new Development Centre site in Cambridge. The 60,000 sq. ft. facility will when at full capacity be home to over 400 employees including knowledge engineers, data scientists, mathematical modellers, speech scientists and software engineers. 

This is Amazon’s second Development Centre site in the Cambridge city centre and is housing R&D teams working on a range of global projects including the aforementioned Prime Air. 

Doug Gurr, UK country manager, Amazon, says: “The exciting and innovative new products and services developed here will benefit millions of customers around the world, complementing the work that goes on in our other Development Centres in London and Edinburgh. I hope this new building will contribute towards our global innovation story with voice recognition, streaming video, machine learning and drone technology all being developed right here in the UK.”

5. Getting serious about furniture and homewares

Amazon recently launched AR View, an augmented reality feature for its mobile app. This gives customers a 3D rendering of how a product will look in their home or workspace. It is activated by clicking on the camera icon in the app and selecting from products across such categories as furniture, kitchen ware and home decor. For now it’s only available for customers with an iPhone 6S and higher, using iOS 11, but according to Natalie Berg, retail insights director at Planet Retail, the launch is significant as it indicates that Amazon is getting more serious about furniture and homewares. Meanwhile, for the broader industry, AR View has the potential to take augmented reality from gimmick to game-changer.

“While they’re certainly not the first retailer to offer AR in their mobile app, Amazon’s reach will help to drive adoption of AR technology. Just like Alexa and Dash buttons, if anyone can transform the way we shop, it’s Amazon,” she says.

Berg notes that while we’ve all been preoccupied with Whole Foods and the like, Amazon has made some significant inroads into the home category by building warehouses dedicated to oversized shipping, introducing new pricing standards for marketplace furniture sellers and launching Amazon Home. According to One Click Retail, furniture is now one of the eCommerce giant's fastest-growing categories with sales in excess of $2 billion.

“What good is augmented reality without the product?” she adds. “The same can be said for the Prime Now service: what good is one-hour delivery without a compelling range of stuff? Hence the Whole Foods deal plus a growing number of global supply agreements with Sprouts, Morrisons, Booths, Feneberg, Rossmann, Dia, the list goes on. Luckily for Amazon, the largest furniture retailer in the world is ready to start selling on third-party sites. An Amazon-Ikea tie-up seems incredibly likely at this stage.”