In some ways it’s an ironic twist. Since its infancy, Amazon (NASDAQ:AMZN) has ultimately been working to declaw brick-and-mortar retailers, and going forward, brick-and-mortar retailing is expected to help keep AMZN stock moving higher.
The next evolution of its strategy is unique, even by the e-commerce giant’s standards though. That is, Amazon is reportedly looking to license the underlying technology that powers its “Amazon Go” stores, which replaces cashiers with cameras, sensors and near-field communication hardware in order to sell its goods. It’s the first time Amazon has chewed on the idea of renting out its IP rather than running such a third-party operation in-house.
It may or may not be a glimpse into the company’s long-term strategy. But, if it is, Amazon could eventually, quietly own the consumer retailing world without anyone fully realizing it.
A New Direction for Amazon
As of the latest look, Amazon operates nineteen bookstores, five “4 Star” locales that feature the company’s most popular sellers, sixteen “Go” convenience stores and a handful of “Presented By” kiosks or pop-up stores. The company also owns the Whole Foods grocery store chain, and says it still intends to cultivate a chain of more conventional grocery stores that would prove a direct threat to the likes of Walmart (NYSE:WMT) and Kroger (NYSE:KR).
Selling access to other retailers, however, is a step in a new direction.
How it might put money in Amazon’s pocket hasn’t yet been detailed. CNBC’s Jordan Novet explains, “Amazon has explored different business models for its third-party Go strategy. The company looked at asking for a percentage of sales from the goods people purchase through the Go-equipped stores, or charging retailers up-front and then taking a monthly fee, two people said. It’s not clear if the Amazon brand name will be visible on the Go hardware or which app customers would use to sign in.”
Regardless, rumors are already circulating that Amazon has already been in talks with Cineworld’s Regal theaters and OTG’s CIBO Express stores — found at airports — as potential users of the tech. Others could plug into the premise with little to no warning though, as the installation of the necessary equipment is hoped to take as little as two weeks.
While the superficial goal is to pocket more money by monetizing technology in a way that doesn’t cannibalize its existing storefronts, there may be more upside for AMZN stock than something as simple as that. The new venture may also be a means of attracting more users to Amazon Web Services (AWS).
Without saying exactly who the “people familiar with the matter” were, Novet notes, “The retrofitting system Amazon has thought up can function without consuming computing or storage resources from Amazon Web Services, Amazon’s market-leading public cloud, two of the people said. Over time, though, as retailers become warm to working with Amazon, they could start to adopt AWS.”
That strategy would prove to be a direct attack on Microsoft (NASDAQ:MSFT) and Google, both of which have begun working with retailers by melding in-store checkout processes with cloud-based functions.
It would also jibe with Amazon’s overarching consumer strategy, which in essence has been one aimed at simply pulling as many people into an ecosystem as possible — the monetization and profit details to be figured out at a later time.
And somehow, of course, Amazon is angling for access to any consumer data created by third-party use of its wares.
Bottom Line for AMZN Stock
The immediate impact on the Amazon stock price from the new business model is apt to be minimal. E-commerce is still the company’s breadwinner, and AWS is growing quickly. The company doesn’t even know for sure how it’s going to monetize its Amazon Go technology, if the whispers are true.
If this is a subtle hint of what’s to come though, the proverbial back door path to retail domination may prove easier to open than the front door is.
It seems difficult to digest in a consumer environment that has embraced the convenience and low cost of Amazon.com. But, consumers may be growing weary of all-things Amazon-branded. As Mashable’s Stan Schroeder put it last month, for instance, “Amazon’s gadget overload is too much for anyone to soak in.” Never even mind the general distrust of Amazon inspired by the DoJ’s high-profile antitrust inquiry of so-called “Big Tech,” which includes Amazon.
The company may want to ease off on keeping its moniker in the spotlight so much. Leasing out its Amazon Go tech would be a good way of doing so without raising eyebrows.
That is, if the rumors are true.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can learn more about James at his site, jamesbrumley.com, or follow him on Twitter, at @jbrumley.