Amazon-GO-final.docx - Problem Amazon has experienced unmatched success in digital sales worldwide They were able to enjoy a first mover advantage in

Amazon-GO-final.docx - Problem Amazon has experienced...

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Problem Amazon has experienced unmatched success in digital sales worldwide. They were able to enjoy a first mover advantage in the e-commerce industry and translate this into capturing a large portion of the market. Amazon now has the opportunity to capitalize on another first mover advantage in the offline grocery industry. The problem is; can Amazon reproduce its online success in the traditional offline retail segment? Recommendation Just as Amazon has succeeded in the e-commerce industry, they can also succeed in the offline grocery industry. In order to capture this success, it is recommended that Amazon acquire a small grocery store chain in the USA who has an established distribution network with dozens of stores across the country (Exhibit 1). To take advantage of the first mover technologically innovative way of shopping, Amazon must implement this technology in all of its acquired stores. Over time, Amazon will be able to re-brand their acquisition and name their stores “Amazon Go”. Analysis By going through with this recommendation, Amazon will have purchased a small grocery retail chain worth $500,000,000 (consisting of 50 stores coast to coast in the USA). Amazon’s net income in 2016 was $2,371,000,000 so there will be enough capital to make the acquisition. The earnings before income tax will be roughly $35,000,000 by 2019. This is a very attractive number that management will be attracted too (Exhibit 2). Decision Criteria In accordance to Amazon’s current problem, core activities, goals, and value proposition, there are a few decision criteria that must be met in order for the recommendation to fit with the company and succeed (Exhibit 3). The recommended decision must lead to innovation, market leadership, increased profits, and must be feasible. Alternatives There are two other alternatives that Amazon can consider. First, they can licence the innovative shopping technology out to other grocery stores. Second, Amazon can build their own Amazon Go stores, implementing the innovative technology, all while building their own grocery distribution network. Both of these alternatives however, do not fully satisfy the decision criteria (Exhibit 4) Implementation In order to take advantage of this first mover technology advantage, Amazon must implement the following (Exhibit 5) & (Exhibit 6): - Convince management and Jeff Bezos that this recommendation is best for the company - Hire research team to analyze which small sized grocery chain consumers are trending towards - Hire legal team to finalize acquisition - Finalize acquisition - Hire a VP to oversee successful integration of grocery chain to Amazon’s strategy and hire information technology personnel to make sure the technology can support mass users - Begin producing the innovative technology - Equip every store with the technology and let go of cashiers - Launch marketing campaigns to promote the new technology - Amazon to re-brand the acquired grocery chain as “Amazon Go” Risks and Contingencies
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