Friday, July 28, 2017

The disruptive potential of Amazon Prime.


I was really lucky because on Thursday morning, I was able to slip an order for some groceries from Amazon and was able to experience the Prime service on my own. As it was Amazon Prime's first day in operation, the order obviously came late and the delivery person was very confused. Thereafter, the service actually went down and even at this time, the delivery service is still currently marked as being sold out.

Regardless of how badly they performed this week, Amazon will get its act right within the next few months if not weeks. The price point of their products were really attractive and I can imagine a lot of Singaporeans opting to order from them instead of going to the nearest supermarket to queue for their groceries.

Here are some preliminary thoughts :

a) Retail is very likely doomed but it has been doomed for a while

Retail has been doomed for quite a while and you notice that malls are switching their focus on providing services and experiences rather than goods. I don't think they will get it right so soon so I expect landlords to seek lower rents over the next few years. 

You can definitely expect to see more cafes, tuition centres and maid agencies in our malls over the next few years. 

b) There might be a boom for delivery personnel in Singapore.

I expect this to be positive for drivers who don't mind working in the gig economy. Not everyone likes to work for Uber and some just want to deliver goods for a living. Over the short term, expect some really attractive jobs which would be a relief for males with lower educational qualifications. 

Demand for driver might even ramp up the pay for Uber and taxi drivers. This boom should last until driverless cars start showing up on Singaporean roads.

c) Warehouses are the next malls.

I am fairly bullish on warehouses now and expect e-commerce companies to start new leases on large warehouses to house all these goods Singaporeans will eventually buy. A new equilibrium will be reached between the space used in malls and space used in warehouses. 

I have a particular concern for our Friend Local Game Shops. I have scanned the board games section on Amazon Prime and find that the discounts are so deep that buying them from vendors on Carousell. Singapore may no longer be able to sustain so many game shops and those that do survive will need to find some means of organizing events to make it more compelling for gamers to show up. 

This is going to be bad for me because, without bookshops and game-shops, I no longer have a reason to even go to Orchard Road.

2 comments:

PGL said...

What percentage share of groceries can e-commerce shoot for in Singapore?
How far can Shenzhen Siong counter Alibaba and now Amazon's ambitions in this space by beefing up their own on line offering?
PGL

Christopher Ng Wai Chung said...

I wish can answer these questions with authority, but I don't know any better.

But I think there is reason to believe that Sheng Siong would not be impacted too much by Amazon. I can easily walk to Sheng Siong and buy my stuff in an hour and scoop up better discounts along the way without using Amazon Prime.

The disruption to Cold Storage would be a lot more drastic because Amazon would be relevant for better quality goods.

We should revisit this again if Amazon can improve the variety of goods in their warehouse.