How Amazon Has Empowered Its Competitors - The Cloud and AI Revolution in Retail

By Jedidiah Horne

Jeff Bezos, buddy, we have to talk.  Isn’t the power you’ve unleashed with cloud-based AI solutions for retailers a real threat to the company you built, your first true love?  I’ll be at AWS re:Invent this coming December in Vegas - can I buy you a drink?

Jeff - Amazon was really the first and only game in town.  It leveraged its scale and ambition to go from a niche bookseller to “The Everything Store” with a massive moat around it’s ability to fill every retail niche in a way that not even the largest brick-and-mortar oligopolists (I’m looking at you, Walmart) have been able to achieve.  At first, this came with a massive benefit to consumers (assuming you measure happiness in how much plastic you can buy from China) but at an underappreciated cost to other retailers in the market.  Without access to models trained on billions and billions of transactions, or to world-class hardware solutions, how could you possibly out-compete the East India Company of our era?

For a while, the answer was in paying for expensive SAAS solutions like Shopify, or just admitting you’ve already lost by offering your products directly on Amazon’s retail platform in exchange for a hefty cut - after all, what were you going to do, have a physical storefront?  

But when Amazon began re-selling excess hardware capacity in 2006, effectively inventing what’s known as “the cloud”, it may have unwittingly exposed its soft underbelly, democratizing access to the very computational power, models, and data that now allow other players to enter the market with relatively little investment.

In my 20 years of experience in the field, I’ve lived this transformation first hand, working on cutting edge logistics platforms (Uber), directly in on-line eCommerce consulting for one of Colombia’s largest discount wholesalers (D1) as CTO of Mi Águila, and by building Valere’s LATAM-based software shop for small and medium US-based businesses.  The key aspects of this transformation to newcomers in the market are:

Personalized Shopping Experiences

Cloud AI can analyze vast amounts of customer data, including purchase history, browsing patterns, and preferences, to deliver personalized product recommendations in real-time, driving sales and customer satisfaction.  Faster and better models mean that smaller companies can compete without the giant datasets once required, although the more data you have the better you’ll perform.  Feedback loops are key.

Dynamic Pricing

Retailers use cloud-based AI to optimize pricing strategies by analyzing competitors, market trends, and demand fluctuations, enabling real-time adjustments for maximum profitability.  Think Uber’s surge pricing for purchasing decisions.

Inventory Management and Supply Chain Optimization

AI-powered demand forecasting systems hosted in the cloud predict inventory needs with remarkable accuracy, reducing overstock and understock situations. It also enhances logistics by optimizing delivery routes and warehouse operations.  At Uber, we were able to poke a finger in Google’s eye with higher-accuracy ETAs than those provided by Google Maps - something unthinkable in the pre-cloud, pre-AI era.

Fraud Detection and Prevention

AI systems identify fraudulent transactions or account activities by analyzing patterns at scale. Cloud infrastructure ensures these systems operate quickly across global transactions, and provide primarily out-of-the-box best-in-class solutions to avoid costly mistakes.

Customer Service with AI Chatbots

Cloud-based AI chatbots offer 24/7 customer support, handling queries, returns, and complaints efficiently while learning from interactions to improve over time.  This is often a key barrier to scale for small companies: the need to hire and manage large teams of people is a deal breaker for most companies without access to significant resources and global reach.

Visual Search and Augmented Reality (AR)

Cloud AI enables features like visual search, where customers upload images to find similar products. AR solutions allow virtual "try-ons" of clothes or furniture placement in their homes.

Hyper-Targeted Marketing Campaigns

By leveraging AI models on cloud platforms, retailers can segment audiences more effectively and run highly targeted advertising campaigns based on user behavior and trends.

All of these things were doable before, but the cloud has democratized access to the key features of software development essential for a successful business.  The speed, scalability, and cost-efficiency of spinning up and tearing down hardware, and the ability to unify online and offline channels into a single “data lake” have unlocked nearly unlimited potential for new players.  This transformation has blurred the lines between traditional retail and digital commerce, enabling entirely new business models like direct-to-consumer (DTC) and subscription-based services.

But AWS is more than that, and Jeff’s mistake may be even bigger!  Newer cloud services and integrated platforms offer custom solutions for the retail industry that offer even further abstractions on top of world-changing hardware access.

AWS Amplify and AWS Lightsail

If what you need is a full-stack, fully-integrated e-commerce web or mobile application with minimal overhead, Amplify or Lightsail are great options.  Amplify requires slightly more programming experience, but both are meant for small-scale companies with limited development resources.

AI-Driven Personalization with Personalize, Forecast, Rekognition and Comprehend

I’m a big fan of naming APIs for exactly what they do: AWS lets you “personalize” product recommendations, “forecast” sales and other business metrics, “rekognize” (sic) images and other media for automated sales flows, and “comprehend” text documents via NLP without needing a PhD in CS.  No brainers if you want to give the people what they want.

Automated Marketing and Customer Engagement with Connect and Pinpoint

These two services are essentially CRMs on steroids, with access to the rich data and models you’ve already built in the ecosystem.  It’s easier than ever to target email, SMS, and other communications channels, and to create cloud-based AI-driven contact centers.

Customer Dashboards with QuickSight

Take advantage of customer and internal dashboards at hyperscale.

Optimize Inventory and Supply Chains with IoT Core and Managed Blockchain

If you need to link brick-and-mortar operations and cloud services, you can easily integrate all your physical sensors with your cloud operations across multiple supply and inventory chains.

I’ll leave more standard stuff (edge-optimized microservices architecture for globally scalable businesses, world-class security and fraud detection infrastructure) for another article, but it’s also worth keeping in mind that AWS offers free tiers and cost optimization services that help you compete, and further undermine their own competitiveness.

If you’re going to re:Invent, keep an eye out for sessions on e-commerce innovations, sustainability in retail, and AI and machine learning solutions like Personalize and Forecast. 

I’ll see you there, JB!