CHICAGO -- When it comes to gauging Wal-Mart and Amazon, there are few more insightful than Moody’s Vice President Charles O’Shea. In an exclusive email interview with CSP Daily News, O’Shea shares his thoughts about Amazon’s anticipated venture into retail stores and the tug-of-war between the country’s most dominant e-retailer and brick-and-mortar chains.
Click through for the Q&A ...
CSP: What is the likelihood that Amazon will actually move in to brick and mortar, especially after building its reputation on dismissing the need for physical stores?
O’Shea: After being the “anti-brick-and-mortar” retailer for so many years, I think it might be tough for Amazon to all of a sudden shift gears and try to go brick and mortar in a meaningful way. In addition, we believe that Amazon does not “distribute” in any meaningful way, which we define as controlling the last mile [i.e., getting product in the consumers' hands via proprietary means, but “fulfills,” meaning it has outsourced the last mile to UPS, Fedex, the U.S. Postal Service and other carriers.]
To go full-bore into brick and mortar, Amazon would need to develop a completely new capability, which would not happen overnight. Further, we do not believe food delivery, except in certain very limited locations, is scalable for the foreseeable future in the United States.
CSP: Will Amazon be more successful at small formats than Wal-Mart and Home Depot?
O’Shea: The small-format Wal-Mart Express stores were really an experiment, and our view is these stores need the Neighborhood Market to generate acceptable returns. We would not be surprised to see this format re-emerge over time.
Caveating the Amazon question as a hypothetical what if scenario, the ability to develop the right format, select the right sites, hire the right staff, stock and be able to replenish the right merchandise is not easy, and our view is that brick and mortar is harder to do than pure-play online retail.
CSP: What areas of innovation in e-commerce will help Amazon in the physical space?
O'Shea: That is a tough one given we have not seen [Amazon] try brick and mortar to any real extent, but some of the fulfillment technology, provided it could expand to actually stocking stores, would be cutting edge.
CSP: What can convenience retailers learn from Amazon’s brick-and-mortar expansion?
O’Shea: Amazon built an entirely new retail channel basically from scratch, which has revolutionized retail. I’d have to think about what a brick-and-mortar retailer that we do not believe will morph online in any meaningful way could learn from the leading pure-play online pioneer; however, the importance of a brand and some predictability surrounding product offerings are never a bad thing.
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