Amazon cometh

Column - Robert Joseph 

Robert Joseph
Robert Joseph

This time next year, will your Dom Perignon or DRC be delivered by Amazon drone? Of course not, I can hear you chortling. The skies above our cities will never be filled with buzzing little whirligigs bearing parcels to our doorsteps. You may be right, but ask yourself if your predictive powers enabled you to foresee Google inventing a driverless vehicle and launching smart contact lenses that monitor diabetics’ glucose levels. Did you realise 20 years ago, when Amazon first opened for business, that the online bookseller would today be the first port of call for many people when they want to buy a dishwasher – or dishes? And did you have the foresight to guess that Amazon would now be launching its own smartphone that can recognise anything from a book to a bottle of wine, enabling its user to order it there and then for delivery to their home tomorrow?

Doubters will find plenty of reasons to argue with my belief that Amazon (and subsequently Google, probably) is set to revolutionise the way we buy wine. They’ll point to the uninspiring nature of the current range, mumble about the online giant’s lack of expertise – how many MWs are they employing, for goodness sake? – and question Amazon’s profitability and whether it will be able to make a decent margin. In short, they’ll make the same kinds of narrow, short-sighted arguments traditional producers of newspaper and books made against online publishing.

Let’s take a brief look at what Amazon has got on its side. First, market reach. Between 2003 and 2013 the number of its global customers has grown almost sixfold, from 40m to 237m. In the last quarter of 2013, according to consumer research firm Kantar Worldpanel, Amazon took 26% of all retail spending on entertainment in the UK, compared to 33% for all supermarkets combined. Amazon’s figure was nearly 6% up on 2012; traditional retailers struggled to see growth of 1%. Of course, the key difference between Amazon and the supermarkets and other retailers is that it knows the names, addresses and buying histories and preferences of all its buyers, and not just the holders of loyalty cards.

Of these, a significant number – over 20m - pay at least $79.00 for free home delivery and free video streaming. These Amazon Prime customers buy more; a Morningstar report last year estimated that they spend $1,224.00 per year compared to $505.00 for non-Prime customers. 

Second, there’s Amazon’s mastery of logistics. Ordinary consumers across the globe are getting used to the kind of service previously only enjoyed by the wealthy: order now, for almost certain delivery tomorrow or the next day. In Seattle, that service has been successfully extended to groceries in the shape of AmazonFresh, whose green Amazon vans are now a familiar sight across the city, and now it is being rolled out elsewhere in the US and to the UK.
Third, there’s the business model. Unlike, say, Tesco, which by necessity has a limited range of suppliers, Amazon will act as a showcase for an almost unlimited number of products. In some cases, the company will buy, stock and sell just like any other retailer; in others, it will take the wine on consignment from producers; in others still, it will work with independent wine retailers, just as it does in its marketplace with independent booksellers. Amazon will be just as happy to offer me fresh meat and fish from top- class online butchers and fishmongers (through its market place) as corn flakes from its own warehouse. And I’ll order it all via the same Amazon account. As Chris Anderson pointed out in The Long Tail, Amazon doesn’t mind what it sells or in what volume, provided it can take a margin on the sale.

Fourth, there’s the way people now prefer to shop. They increasingly prefer to trust their peers – other customers – rather than critics. Amazon offers this in spades. They like to buy quickly and simply; the option of pointing their phone at the bottle they are enjoying in a restaurant or at a friend’s house and hitting a ‘buy & deliver’ button will suit plenty of them very nicely thank you. And the more who do that, the more the economies of scale will further reduce the costs of all those deliveries.

Finally, Amazon subscribes to the Samuel Beckett philosophy: “Ever tried. Ever failed. No matter. Try Again. Fail again. Fail better.” I do firmly believe that after a few more failures, Amazon will indeed change the way we buy wine. With or without drones.
 

 

 

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