Can Amazon be stopped?

by Dave Michels

Prime retail space is going vacant. The latest example of yet another retailer closing its doors is Payless Shoe Source. Payless has filed Chapter 11 and will be closing 400 stores. It’s ironic really, because their whole premise is Americans want to pay less for shoes, but the retailer can’t match the price or experience of online options. It’s one more example of the epidemic hitting brick-and-mortar retailers.

Last year (and again this year), it was Radio Shack that prompted the headlines. Sears has been in decline for decades. The Limited is even more limited now that it has filed for bankruptcy and has begun closing 250 of its stores.

Macy’s and Sears alone will be abandoning 28 million square feet of retail space. The loss of these anchor stores is what starts the dreaded domino effect at the mall. If the mall can’t back fill that space, reduced numbers of shoppers impact the demand for sunglasses, cinnamon rolls and all the other small businesses that survive on the other brands’ crowds. When they fall, so does the mall.

The people who find this phenomenon hard to fathom are those who grew up in an era where brick-and-mortar stores were just stores. If you needed an item, you simply went to a store. This is no longer the case. Shoppers now have choices and are increasingly going online to research, evaluate, and purchase items—and that brings us to Amazon.

Compared to the internet, the brick-and-mortar experience is as fun as it sounds. It starts with the hunt for parking and then comes the hike—not just to the store, but often within a store. Then come the inevitable need for sales assistance to confirm that the particular size/color/item of interest is out of stock. The lucky ones who do find their item will pay a premium needed to cover the ambient surrounding “value.”

The similarities between retailers and enterprise communications

The story here isn’t that ecommerce is winning, but that there are eerie similarities with the premises-based market for enterprise communications. It’s the same basic story. The business customers are moving toward cloud-delivered services, and the consumers are welcoming the move.

The premises-based communications vendors are fighting over a shrinking market. Sears and Avaya were both giants in a different era. Last month, Toshiba outright quit business communications. The equivalent of the communications mall is the surrounding ecosystem of dealers and complementary products. Think of call recording solutions as cinnamon rolls, and the comparison becomes clear.

Cloud-delivered solutions have less burden than premises-based systems

Premises-based communication systems, like brick-and-mortar retailers, were the status quo when there were not many viable alternatives. Like the retail shoppers, organizations are realizing that technology doesn’t have to come with so much burden. Cloud-delivered solutions don’t require the customer to install, operate, upgrade, and plan for capacity and disasters.

Amazon largely defined modern ecommerce and then leveraged its expertise with a leading ecommerce platform that it launched as Amazon Web Services (AWS) in 2004. It has been innovating rapidly ever since. Today, Amazon is winning a three-way race (against Microsoft and Google) in cloud infrastructure services.

AWS has expanded well beyond its virtual servers (EC2) and virtual storage (S3). Over the past few years, AWS has expanded into business software applications, replacing the need for enterprisewide licenses from other vendors. For example, WorkMail provides enterprise-class email. Amazon WorkDocs provides an enterprise platform for document management, sharing and collaboration. In February, Amazon announced Chime for enterprise conferencing, and last month, Amazon announced Connect for contact center services.

Amazon’s enterprise actions follow same pattern as its retail moves

Amazon’s gradual disruption of retail reveals a long-game strategy that has been going on for decades. AWS’ enterprise aspirations are relatively new, but they follow a similar pattern where the company launches barely viable products that rapidly iterate into powerful solutions. The ace up Amazon’s sleeve is its broader suite of AWS building blocks, such as artificial intelligence, neural networks, blockchain, big data, digital marketing, gaming, government compliances, and IoT.

This Lego approach was highlighted with last month’s launch of its new contact center service, AWS Connect. Today, this is a simple, voice-only solution far below a competitive threat to more mature solutions. However, it is unlikely to stay that way, and it can already be combined with other services that make it an intriguing offer.

For example, callers can skip the agent and interact directly with conversational bots powered by Amazon Lex. The entire call can be recorded and stored in a secure Amazon S3 container available for queries with AWS Athena or analyzed for sentiment with AWS Kinesis. All these services are available without initial costs or commitment.

AWS is also poking the contact center hive with a usage-based pricing model. The hosted contact center space today generally follows a model with recurring fees and a price per agent, per month.

AWS Connect is unlikely to remain voice only. Amazon claims Connect is based on its internal systems, and Amazon today uses omni-channel communications with its customers. In 2013, Amazon launched Mayday on its Kindle Fire devices that uses video and screen-sharing to facilitate support services. Amazon also has expertise with WebRTC, as evidenced with its Chime conferencing service.

What’s particularly interesting about Amazon is how it’s looping back to revise the premise of premises-based solutions. On the retail side, it is experimenting with new types of brick-and-mortar stores that use sensors and cloud services to streamline the shopping experience. Amazon’s new concept with Go Stores is unique in that there are no cashiers. These are walk-in hotel mini-bars that sense who took what off the shelf and charge accordingly.

On the IT side, Amazon is pioneering new premises-based hybrid models that split compute loads. This architecture addresses many challenges associated with IoT, such as latency. See AWS Greengrass and this prior post.

This is not idle musing. According to research from Slice Intelligence, Amazon recently captured 38 percent of all online holiday shopping dollars. The next-closest retailer, Best Buy, had a mere 3.9 percent. Remember Circuit City and CompUSA? 

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