Amazon’s quest for global retail dominance (quietly) leaps ahead

I’ve always been a fan of as a shopper – their combination of comprehensive inventory, fair prices, free basic shipping and great customer service remain the best around – but I haven’t always been convinced that it’s a great business. Particularly in the early days, when they were shouldering the financial risk of carrying their own inventory, it was hard to set their long-term prospects apart from any other big discount retailer. But as they’ve pivoted to more of a platform strategy, where they get paid to innovate in customer relationship management, merchandising and fulfillment but leave most of the inventory risk to others, they’ve taken what appears (to me at least) to be the dominant position in online retailing, not quite as good a franchise as Google’s, but with some analogous winner-take-all benefits.

A few of the company’s recent moves illustrate how their ongoing investment in retail technology has given them an almost insurmountable competitive advantage over any other retailer, online or off:

  • Universal Wish List: Amazon has always been a leader in data-driven merchandising, sifting purchasing behavior among their millions of customers to offer highly relevant product recommendations to each. In the past this this capability was limited to inventory actually listed in Amazon’s product database, but this summer they released Universal Wish List, allowing Amazon customers to “bookmark” products on any online retailer’s site. The tool currently requires installation of a browser extension, limiting adoption to the technically adept, but in concept the service allows Amazon to become the “database of intentions” for all online shopping, much like Google has become in online search. Despite the clunky current implementation, the ambition behind the product is clear: to make Amazon the point of origin for all online shopping, whether the transaction is processed by Amazon or not.
  • Amazon Remembers: If Universal Wish List signals Amazon’s appetite to own the online shopping experience, Amazon Remembers indicates a similar ambition in the bricks-and-mortar world. It’s easy to miss the feature, as it was slipped out as a companion product to the new Amazon iPhone app, but if you read the copy it’s hard not to notice:

    “Use Amazon Remembers to create visual lists of things you want to remember while out and about [i.e., by taking a photo with the iPhone camera]… If the item you want to remember is a product, Amazon will try to find an item for sale like the one in the photo. If we do, we’ll send you an email alert…”

    In other words: take a photo of any product anywhere and we’ll try to find one we can sell you through Amazon. The current back-end to this is a kludge, relying heavily on human labor via Amazon’s Mechanical Turk service, but the naked ambition should be enough to make any store-based retailer (and especially electronics and general merchandise chains) sit up and take notice.

In the short-term, neither of these offerings will make much of a dent – they cater almost exclusively to the tiny population of tech-savvy early adopters – and could be easily dismissed as gimmicks. But make no mistake, with these two services Amazon has fired a shot across the bow of anyone who sells commodity merchandise, online or off. No matter where they shop, Amazon plans to own the consumer experience and direct their spending down a path that makes money for Amazon. I think they can do it, and it’s going to be fun to watch.