Imagine walking into a grocery store, choosing your items, and walking out.
No lines. No checkout. No price checks. No money exchange.
If that seems like grocery-shopping heaven, then you’re going to love the latest from Amazon: Just Walk Out Shopping. Completely rethinking the shopping experience, Amazon Go employs innovative technology to create a seamless, unique, and delightful customer experience.
Although this isn’t Amazon’s first attempt at brick and mortar, it’s a logical fit and aligns with the current brand values of convenience and innovation. But will this be a brand extension success?
The Brand extension strategy (found at the #TopRight corner of the matrix), leverages the parent brand to enter a new product category. When compared to the launch of a new brand, this approach adds incremental value and reduces risk and costs. This strategy is more common for firms whose current brand equity is strong enough to influence existing customer base and brand loyalty to increase profits with the new product category offering.
There are many variables involved in having a successful brand extension. The general consensus is that when brand equity is high, the chances of a successful brand extension increase. Based on this fact, there are higher chances of a positive launch for well-known brands. On the other hand, there are a number of examples in the market of how even the most well-known brand might fail.
Although nearly 84 percent of brand extensions fail and only 54 percent survive after the third year, Amazon has mastered brand extension in the past and is uniquely positioned to drive major disruption for retailers.
Here are 3 reasons why we predict Amazon Go will be a brand extension success.
1. New Customer Segments
Amazon created and dominated its existing market. But not everyone is an online shopper. Even as online sales continue to grow, there will always be customers it cannot reach. This brand extension enables Amazon to expand its customer base by attracting offline shoppers.
2. Mo’ Data, Mo’ Money
Understanding buying habits of individual consumers to provide more personalized marketing has been a challenge for grocery stores and retailers for years. Amazon solves this problem with an analytics-first approach to the in-store customer experience. Not only does this fuel individualized marketing, it also provides Amazon with the highly-coveted singular view of individual customer buying habits, both online and offline.
3. A+ for Alignment
Hyperscale businesses like Amazon often enter one industry and leverage platforms to create collateral damage in others. Introducing brick-and-mortar provides a platform for Amazon to grow Amazon Fresh and Amazon Payments, two brand extensions that have struggled to gain adoption.
Amazon Fresh launched in 2007 but has been slow to expand due to challenges with handling stock of perishables, managing refrigerated warehouses, and hiring delivery people in new markets. Amazon Go solves these problems and offers a new distribution channel for fresh food items, especially fresh meal kits. Prepped meal companies have an uphill battle making a profit and retaining customers is a debilitating challenge—90 percent cancel within 6 months of signup. Amazon has amazing customer retention rates for its Prime subscribers, so this unlikely to be an issue.
Amazon Payments has struggled to gain adoption, although it experienced 150 percent growth in 2015.
“The payments industry is crowded and highly competitive, with small companies like Adyen, Square, and Stripe elbowing PayPal, Visa, and Citi’s Retail Services group for market share. Another challenge, unique to Amazon, is that the company is a direct competitor to many potential clients, especially larger retailers.” — Fortune
The extension into brick and mortar provides a unique platform for Amazon’s payment system. At the very least, it offers Amazon customers a delightful in-store experience. This new retail experience could present unlimited possibilities for Amazon.
Will the brand try to market its Just Walk Out technology to other retailers? Grocery stores? Gas stations?
Is this the future of grab-and-go?
What do you think about this reimagined grocery shopping experience? Do you think it will be a brand extension success for Amazon?
Moving your business to the #TopRight requires a deep understanding of your brand and your customers, particularly when evaluating if a brand extension is the correct strategy for your organization. Learn how to bring Alignment to your Story, Strategy, and Systems in our new eBook Transformational Marketing: Moving to the TopRight.