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Amazon in Home Care: A Credible Competitor

May 2018

Amazon is widely regarded as “king disruptor”, but in order to grow and defend it’s number 1 internet retailer position in the face of stiffening international competition it will need to break into new areas, regionally and in internet resistant categories. There is clear investment in grocery offers, and its efforts to progress the laundry proposition are indicative of an overarching fmcg “frictionless commerce” strategy, detaching transaction decisions away from the act of spending money, an

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Best-in-class

Amazon is widely viewed as the ultimate retailer in terms of “reinventing” retail and disrupting traditional channel structures in the pursuit of what it terms “frictionless commerce”. This has developed beyond bricks and mortar and now includes disrupting established online sales structures, with propositions merging additional elements, as set out below. These additions each look to be a management focus Amazon is deliberately turning into a stable of “best-in-class” capabilities.

The value emerging

This is not an isolated case of being an early mover - examples beyond Echo/Alexa include smart home adoption, web data services, e-readers and content on demand. The latest experiment is Echo Look, focusing on apparel and the experience of trying new clothes. There is a consistent futurology-based competitive advantage at work.

All under one roof

Smart home propositions are based on the idea that traditional in-home consumer systems for managing chores and home entertainment can be improved by connecting multiple devices and activities, creating synergies from brands and different industries working together with better data sharing within IoT.

All the ingredients too

Looking at home chores, one theory is that brands operating in one part of a consumer system gain better control beyond their current scope by acquisition or alliance with brands from another part of the system (such as an appliance brand allying with food delivery brands, or building an own label detergent business).

Introduction

Scope
How Amazon’s revenue splits out (2016 Annual Report)
Three strategic pillars (drivers of both growth and profitability)
Best-in-class
Strengths that cause rivals the biggest concern
Are you listening?
Futurology
The value emerging
A ll under one roof
All the ingredients too
S trategic surprise circa 2016
Miele: advantages of “system level” strategy
System strategy: creating good shopping experiences
System-wide an overwhelming advantage
Amazon’s scaled “system strategy” virtuous circles

Existing and Emerging Activities

US strength and global risk
Amazon needs to expand beyond its existing core success areas
Amazon activity is one driver for internet retail penetration by sector
The most disrupted retail markets
Some reasoning (1)
Moderately disrupted retail markets
Some reasoning (2)
The retail markets that are (so far) least disrupted by the internet
Some reasoning (3)
Amazon’s efforts to break into the USD5.6 trillion grocery market
Food retail is a necessary milestone to winning across all of fmcg
Food and grocery formats being evaluated: fresh, Go and “Pantry
Shopping lists are among the most used functions of Alexa
Food/grocery formats being evaluated: Dash and DRS
New Home Services started in US, and fashion remains a focus
“Last mile” fulfilment investment continues
Droning on
Post office

On the “Side” of the Consumer

Simulation: a different cost base can drive price-based disruption
Not everyone is a fan
Robin Hood

On The “Side” of the Consumer

Disruption of the idea that brands and retailers are aligned
The decline in institutional trust
Empire of t rust
Trust and the value of genuine recommendations
Amazon Prime’s impact on value, loyalty and reputation

Containment Issues

Success rarely goes unpunished
S ervices competition
Distribution policies
E xtreme measures
Range
Choice example
Pricing
Even specialists struggle
Device competition
Loyalty programmes
Logistics
Jet set
These are all reactions to yesterday’s success…what is next?

Smart Home Power Position

Range depth in the Amazon smart home stores versus rivals
The relevance of data storage and brand-owned data clouds
Amazon “Dash” and a future vision of fmcg auto-replenishment
The Dash button: background and implications (1)
The Dash button: background and implications (2)
The Dash scanner: background and implications
Dash Replenishment Service: background and implications (1)
Dash Replenishment Service: background and implications (2)
Smart home, Echo/Alexa and new home care value considerations (1)
Smart home, Echo/Alexa and new home care value considerations (2)
Having hardware, consumables and services under one roof
Grocery cracked?
The latest virtuous circle: the attack on fabric care and apparel

Future Trends

Future growth
New disruptions anticipated in the industry from Amazon
Pre-emptive retail
Amazon’s share of home c are: Is it a credible future leader?
US and Europe
Is Amazon a credible future leader?
Competition in the East
Competitive threats
What could disrupt the disrupter: tax issues?
What could disrupt the disrupter: regulatory threats?
A big beast
What can disrupt the disrupter: profitability issues for Amazon?
Final thoughts
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