How Disruptive Will Amazon Go Become?
The wide-moat online retailer's well-earned reputation for convenience--a component of our brand-intangible asset moat source--could be enhanced by checkout-free shopping.
On Dec. 5,
The idea of Amazon physical stores seems to run counter to its successful online operations, which offer tremendous scale advantages. That said, we see a few reasons that this endeavor could succeed. First, by eliminating checkout and automating inventory replenishment--both of which could drive higher inventory turns versus traditional grocers--Amazon could effectively offset its lease costs. Second, we believe Amazon views physical stores as an extension of its logistics capabilities. While an 1,800-square-foot format would be too small to handle a high volume of order pickup/returns, we could see larger formats offering these capabilities. Third, by tying the service to a mobile app, it bolsters the network effect behind our wide moat rating while unlocking order frequency and targeted marketing opportunities. Finally, and perhaps most importantly, Amazon's well-earned reputation for convenience--a component of our brand intangible asset moat source--could be enhanced by checkout-free shopping.
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