When you’re selling cloud computing services to retailers, it can be an advantage and a disadvantage to have Amazon in your name.
The part of Amazon Web Services that’s responsible for selling to retail companies is based in Dallas. Its top executive had something to say about that last week.
Phil Thompson, worldwide tech leader for AWS’ retail business, said some of his competitors want retailers to think there’s no wall between Amazon the retailer and Amazon the technology seller.
But his customers — retailers — “aren’t stupid,” said Thompson, who was chief technology officer at Richardson-based Fossil before joining Amazon two years ago.
“The competition wants you (potential retail customers) to fear us,” said Thompson, whose job is to develop strategy to sell technology solutions to retailers. “A few won’t work with us because we’re Amazon.”
That kind of competitive chatter hasn’t mattered too much so far.
In recent years, AWS has been driving Amazon’s profit gains, up 38% year-over-year through September. While AWS represented only 13% of Amazon’s total sales during the first nine months of 2019, it contributed more than 60% of Amazon’s operating income.
It also has a big slice of the cloud computing market. Gartner estimated that AWS leads its cloud computing competitors with a 47.8% market share, according to a report last year based on 2018 results. Microsoft was No. 2 with 15.5% and Alibaba was next with 7.7%. Google, which Gartner said had a 4% share, and Microsoft are growing at faster rates than Amazon.
But as these technology giants push to serve the growing computer needs of U.S. companies, they are “stoking a fight that is expected to dominate the tech world over the next decade,” the Wall Street Journal reported earlier this month.
As far as the retailing piece of the battle, Thompson knows technology needs from both sides. He joined Fossil in 2009 after selling an e-commerce platform company that he founded. At Fossil, he was chief technology officer and helped moved the fashion accessories maker into the wearable tech and smartwatch business.
AWS doesn’t apologize for being part of Amazon and actually promotes it.
Last week, huge banners graced the multi-story entrance of the technology trade show at the National Retail Federation’s annual convention in New York.
“Born from retail, built for retailers,” the signs read, with the signature Amazon smile logo below it.
While taking a couple of reporters through the AWS booth during the industry trade show, Thompson said AWS’ relationships with its retail customers are the same as those of consultants, accountants and service providers that cater to retailers.
Those companies don’t share their client’s information with their other clients, and neither does AWS, Thompson said.
AWS upped its presence this year, its third year, at the retail industry’s trade show, said Robert Hetu, Gartner retail analyst. “I know they have an intense focus on retail. Smaller and medium size companies are using AWS, but the biggest will be the slowest to embrace it. One reason is that they have more resources.”
Hetu agrees with an overriding theme at this year’s technology show that retailers need to stop thinking that technology is proprietary. “It’s how the retailer uses technology, the customer experience and content that are differentiators,” Hetu said.
AWS says it has thousands of retail customers worldwide, including Dallas-based Neiman Marcus, Nordstrom, Levi’s, J.Crew, Brooks Brothers, Lululemon, Adidas and, of course, Amazon.
Walmart and some others aren’t going to do business with AWS or companies that build platforms on AWS because they worry that they’re supporting their competitor, Hetu said.
“But retailers need to use the best technology possible, they need to think differently,” Hetu said. “If you can use Amazon’s technology against it, why not?”
Netflix is an example, Hetu said. The video streaming market all runs on AWS, including Netflix, a big competitor of Amazon’s entertainment business.
Amazon started offering IT infrastructure services, now called cloud computing, to other businesses in 2006. Its primary product is still remote computing, but AWS has expanded its products.
Thompson said now he’s selling scale, security and reliability. Online retailing can dramatically improve capacity during peak shopping in November and December, he said. And as more vendors have moved to AWS, the range of applications for employee and customer tools that operate in the cloud have expanded, he said.
In its simplest description, the cloud means that data and programs are stored and accessed over the internet instead of on big servers.
Kroger, the largest U.S. traditional grocer, is not an AWS customer, but its technology partner Ocado, which is building five online grocery fulfillment centers for Kroger, including one in Dallas, is a customer, Thompson said. Men’s apparel brand Bonobos is an AWS customer even though it has been owned by Walmart for a couple of years. Walmart, which is locked in the most-watched battle in retailing with Amazon, isn’t an AWS customer.
Indirectly, it might be.
Last year, at the same trade show, Thompson said he looked out at the other vendor booths and determined that “well over half of them are also our customers.”
“Adobe, SAP, Salesforce … are all running on our cloud,” Thompson said.