Amazon Go Venturing Into Traditional Retail Case Solution

1. Executive Summary

Amazon Inc. is the largest e-commerce company in the world. Part of the coveted four largest digital enterprises in the world, along with Facebook Inc., Google, and Apple Inc., the multinational has its eyes set upon the offline retail market. While the company has competed with the likes of Walmart, Macy’s, Home Depot, and Target on the digital platform, and come on top, opening up physical location is an entirely new experience. 

The company lacks the experience necessary to open up and run brick-and-mortar stores as well as manufacture own-brand products. There is a high level of risk involved as there is no telling whether the move will be a success or not, especially given Amazon’s inexperience. It will also mean higher costs of maintaining physical stores, something that gave Amazon a competitive edge over rivals like Walmart that had retail outlets while Amazon did away with having warehouses. 

Despite these reservations, I recommend investment into Amazon Go and increased efforts to bolster the project. This is because it provides Amazon a way to evolve and increase its market base. It also brings Amazons unique innovation into the game, cashier-less shopping, which is expected to transform the way shopping is done offline. The risks are there, but so is the immense potential which Amazon needs if it is to grow consistently.

2. Key issue/decision point

Key issue: Amazon Inc. is one of the largest multinational companies in the world. Going from a small online platform for selling books (The Balance Careers, 2019), to a global presence today. Currently the company has grown exponentially. Its Amazon Prime market, for instance, has become saturated (Kittilaksanawong & Karp, 2019) and the company is looking at new avenues to expand and grow. 

It has already entered the manufacturing sector by making its very own tablet, Kindle Fire, to compete with Apple’s Ipad. It needs to break into new segments and use its innovation and brand name to expand its market base, like setting up physical retail outlets.

Decision Point: Amazon Inc. has the means and capabilities to set up physical stores and invest in its vision of Amazon Go. The move is fraught with risk as the company has no prior experience in managing and maintaining a physical store. Should the company, in a bid to expand, go with this risky venture, or should it stay in its lane of being a digital retail giant?

3. Alternative assessment

Alternative 1: Invest heavily in Amazon Go to enter into the brick-and-mortar retail market

Pros: 

• Breaking into the offline retail sector

• The move is keeping in line with Amazon’s expansionary vision

• Is an organic move to go from online retail to offline retail

• Company can bring its unique innovation into physical retail sector

• Its digital platform can be used to assist the offline stores, like Amazon Go offers Amazon Prime users to check out automatically.

• Augments Amazon’s brand as own-brand products are made more accessible

Cons:

• Is a very risky venture

• Amazon has no prior experience working within the offline retail sector

• It faces tough competition from already established players like Walmart and Target

• Setting up retail outlets is bound to increase Amazon’s costs 

• Move from digital to non-digital is a major departure from the general trend of non-digital to digital.

Assessment:

Investing in Amazon Go and expanding the setup to more locations is an unprecedented move. It goes against the trend and Amazon breaking into the offline retail sector is a unique case. The company is a force to be reckoned with in the digital sector, but has no experience in the offline market, so there is a very real risk of failure. However, Amazon is trusted brand and the company possess the funds to take a chance. In fact, its digital setup can help bring innovation into the traditional retail sector as well. This opportunity can end up expanding amazon’s market base and result in accelerated growth for Amazon.

Alternative 2: Focus on its digital business which is key to Amazon’s success

Pros: 

• Focus on its core strength which is a source of competitive advantage against its rivals

• Be risk averse and prevent the possibility of a massive loss in case traditional retail is a bad fit for Amazon

• Expand beyond retail but within the digital realm

• Work on innovating its digital business

• Improve upon customer service for its online customers

Cons:

• Is a limiting option, especially considering how saturated the market has become

• Growth is seriously hampered and Amazon is facing tough competition from brick-and-mortar stores (Ovide & Halzack, 2019)

• Traditional retail outlets are competing on Amazon’s own turf

Assessment:

This option lets Amazon play safe and focus on its core strength, its digital platform where it is the market leader by a long shot. But possibilities for growth are very limited and may require a lot of innovation and investment. In addition to that most offline retailers are also selling online and giving Amazon tough competition. Like Walmart is financially sound and large enough to undercut Amazon which is a major threat to Amazon’s position.

4. Recommendation

Chosen alternative

Alternative 1: Invest heavily in Amazon Go to enter into the brick-and-mortar retail market