Tuesday 20 June 2017

Amazon 'patents' a new definition of a shop...

Amazon's latest patent, aimed at preventing alien showrooming in store (!) could be another nail in the coffin of a traditional shop.

In fact Bezos' patent, combined with his Whole Foods snack, raises some fundamental questions:

What is a shop? (Sales outlet?, showroom?, sales aid?)
  • Maximum assortment (needs to offer everything, even long-tailed SKUs, selling less than a SKU/month...)
  • Online can offer ‘infinite’ selection (‘Amazon 300m items…’)
  • Tesco cull 90,000 SKUs to 60,000 SKUs (Cull 1), enough is not enough?
  • Tesco discovery of 80/20: 80% sales via 20% SKUs, what really counts instore?
  • Sales/sq. ft. (Standard £1,000/sq. ft.) but should we include all sales of the SKU by the retailer, including their ‘show-roomed’ sales, providing they capture these sales on their online facility (but every little blocking of 'alien' sites helps...)
  • Redundant space: ‘large space redundancy’ (can franchisees produce adequate returns even with a mix of rental and share of sales?). If not, instore theatre has to generate £1k/annum/sq. ft. or the store performance goes down to say £750/sq. ft./annum, thereby diluting value of the real estate…
  • UK mults own a high proportion of their stores, and are locked into the space (because 2% depreciation per annum means 50 years of the same (in this retail climate?)
This just shows how the fundamentals are being challenged…(by Amazon)

Who in the supplier or retail company is doing this degree of fundamemntal and open-ended thinking?

Not being an experienced retailer, Bezos does not know what does not work, and goes on to make it work…while expert retailers continue to search for the tram-tracks…

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