Here’s How Amazon Might Take Over Brick-and-Mortar Retail
The recent launch of Amazon’s in-store credit card reader and checkout software was one of Jeff Bezos’s most deliberate acts to date to grab a slice of the 85 percent to 90 percent of total purchases that still happen in the physical world. But the people who know Amazon the best said it has far more ambitious plans in the offline world.
Since I first wrote in January about Amazon’s plans for an in-store payments system, I’ve consulted with a handful of former employees as well as some of the smartest people I know in the retail payments industry to analyze what Amazon’s next moves will be. All of them have requested anonymity because they believe they are relaying ideas currently being discussed at Amazon or are restricted from speaking about the company.
Broadly, they said the world’s largest online retailer aims to make it easy for a wider array of brick-and-mortar shops to sell on Amazon while giving Amazon shoppers another way to receive orders on the same day they are purchased. The move would extend Amazon’s reach far beyond the virtual checkout aisle to the real ones in your neighborhood.
The payoff could be significant if Amazon manages to convince a large number of physical stores to adopt the new payments hardware and checkout software, known in the retail world as point-of-sale software. A wave of new small business sellers — ones that previously didn’t sell on Amazon because they didn’t have the time or resources to ship orders — could flood Amazon with new offerings. The strategy could also advance Amazon’s goal of getting a greater percentage of orders into the hands of customers on the very day they are ordered and fulfill one holy grail of retail — instant gratification at scale.
The plan is likely to come in several stages. Amazon needs to deepen relationships with these stores beyond simply having them accept payments using the Amazon credit card reader and tracking sales on Amazon’ point-of-sale software. The online retailer will need to develop software tools to help them keep track of their in-store inventory. Amazon would then rely on these stores as both customer pickup locations and hubs to support same-day delivery, too.
If Amazon is going to use their locations to fulfill pickup and same-day delivery orders, the online retailer will have to persuade those that sell products — think hardware stores or independent convenience shops — to place their products for sale on Amazon.com. Some of these businesses might send some inventory to Amazon and let the giant online retailer handle shipping. But others may not have enough inventory to afford to do that or may not want to. In that scenario, several sources believe, Amazon will give online shoppers who want to purchase products from these businesses on Amazon.com several options to receive these goods quickly if they live in the general vicinity of the business.
One option would allow Amazon shoppers to either pay for or reserve the product on Amazon.com and then pick it up from the physical store that sells it. Another option, former employees believe, will see Amazon give shoppers the option to have these goods delivered directly from the store on the same day an order is placed. People familiar with Amazon’s thinking believe the company would likely rely on a crowd-sourced network of delivery people to help make this a reality.
“Jeff [Bezos] thinks about all of the core assets as platforms and wants to drive maximum utilization through the platforms to get more efficient, achieve greater scale, build competitive advantage, etc,” one former Amazon employee told Re/code in an email. “To drive scale and utilization, you need to put as much through the system as possible. So if they can execute on building out local delivery, their appetite [for what to put through the system] will be endless.”
In order to coordinate same-day pickup or delivery with a network of stores, Amazon will need access to real-time inventory information from its partners or risk shoppers ordering items for pickup only to find the store is out of stock of the ordered item. That means Amazon will have to expand the features of the current point-of-sale system to include inventory management or tracking tools.
Clearly, none of this happens overnight, sources cautioned. Tens or hundreds of thousands of businesses will need to adopt Amazon’s credit card reader and checkout software. That is a lot to ask of products that just launched.
An Amazon spokeswoman did not respond to requests seeking comment.