Any time Amazon announces a new innovation or makes a move into a new industry, it sends ripples throughout that industry and beyond. Case in point: the purchase of Whole Foods and the announcement of one-day shipping, for starters.
The e-commerce ace made a surprisingly quiet, but profound, move in February, one that CEO Jeff Bezos has barely spoken of, at least publicly. They made a $700 million investment in electric truck startup and future Tesla competitor, Rivian, opting not to comment on it. This followed a stake they bought the prior week in Aurora, an autonomous vehicle technology startup.
CNBC obtained a recording of a March all-hands session in which Bezos offered perspective on the autonomous technology investment to his employees. Bezos expressed his fascination with the auto industry, given how Uber has changed transportation and given the rise of electric and connected cars. Said Bezos, “It’s going to be something very interesting to watch and participate in, and I’m very excited about that whole industry.”
Surprisingly during the meeting, though, Bezos tamped down expectations by saying he doesn’t see the Rivian investment as being a driver of growth. Which begs the question, then why make the investment?
Here’s why Amazon entering the auto industry is so smart.
This play isn’t about profit, at least not from the auto industry in and of itself.
Michelle Krebs, an analyst and auto industry expert for Autotrader (an online vehicle marketplace) told CNBC, “We know that Amazon wants to reinvent its delivery system.” Amazon has been trying to wean away from dependency on the USPS and UPS, even creating an enticing overture to current employees to quit their post and start a delivery business. Autonomous vehicles could vastly disrupt their massive logistics systems and supply chain.
According to Gene Munster, an analyst at Loup Ventures (a venture capital firm), Amazon’s investments in autonomous vehicle technology also gives them “greater insights into cutting edge technology” that can have a direct benefit on the company’s core e-commerce business. It could reduce shipping costs, which skyrocketed 21 percent to $7.3 billion in the previous quarter. Munster called it “a form of outsourced R&D.”
In January, Amazon announced a new delivery robot, about the size of a cooler, called Scout. The autonomous little guy, hailed as the cutest part of Amazon’s delivery chain, rolls along sidewalks to take that Amazon package the last mile to the customers doorstep. Undoubtedly, what’s learned as scientists exchange notes post the Rivian purchase will help inform Scout 2.0 and beyond.
Finally, don’t count out the auto industry play for being able to influence Amazon’s retail forays as well. Amazon Go, the cashier-less stores launched in 2016, “is made possible by the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning,” according to the Amazon Go site.
Amazon’s investments in autonomous companies makes for a genius way to cross fertilize cutting edge technology and insight across multiple platforms of business. More and more companies are attempting to jumpstart their innovation by accessing technologies from other companies and trying to import it in different ways across their own product line. My former employer, Procter & Gamble, has been doing this for years in an attempt to create better products and new categories.
While the day when Amazon starts competing directly with Ford and GM won’t happen any time soon, the Seattle stalwart continues to set the pace for Jetsons-like ways that your designer soaps arrive at your front door.