Should Retailers Be Worried About Amazon’s Kiva Deal?
Written by Evan SchumanWhen Amazon on Monday (March 19) announced its $775 million cash deal to buy Kiva, a popular robot automation fulfillment center player, it put many of its existing retail clients in a bind. This includes current Kiva clients—Walgreens and Saks, among others—plus other recent (and possibly current) customers, such as Gap, Crate & Barrel, Staples, Dillard’s, Toys’R’Us and Office Depot. How will all of them feel about systems in their warehouses—which know everything about product flow and, even worse, can control speed, accuracy and efficiency of product flow—being owned and controlled by Amazon, a direct rival? Granted, Amazon would have to be crazy to risk being caught using that information or deliberately slowing down operations. But will the latest technology get shared quickly? Or will Amazon hold onto it for extensive testing in its own warehouses?
And what about the psychological impact of having execs at Walgreens or Toys’R’Us having to write checks to Amazon (or to a Kiva account, fully owned by Amazon)? The devices themselves are impressive little robots, capable of carrying a half-ton of products and knowing where to fetch and where to return. For any sci-fi fans out there, we’re talking about intelligent powerful robots controlled by a corporate empire and working in the inner operations of its rivals. What could possibly go wrong?
-Marc
March 27th, 2012 at 8:51 am
I think the points being raised express are valid concerns, however I do think that emotions are running high at the moment because we tend to think the worst in the absence of information.
Once the dust has settled, I think it will be business as usual for Kiva Systems in terms of selling new systems and servicing existing accounts. Presumably there will be more cash available for the business to support external growth in demand.
I personally think that Amazon will want to quickly leverage this investment to start solving a critical constraint in their supply chain which is the availability for warehouse labor resources for their rapidly growing distribution network. I think that Amazon will quickly become the dominant customer account for Kiva given that Amazon now has over 20 Million sq ft of distribution centers in the US and Canada alone. The questions that I have are (1) How much Kiva production and support capacity will remain available for non-Amazon customers going forward? (2) Will potential customers be scared away by this acquisition because of the potential for such a capacity constraint? (3) How will the new Amazon / Kiva team ensure that new and existing non-Amazon customers don’t get “sent to the back of the line” so to speak.
I’m optimistic that these concerns will be dealt with appropriately but I so think the market needs immediate feedback to address the concerns being raised.
March 29th, 2012 at 1:44 pm
This is a great question-and what happens when any big tech company buys a SaaS solutions that has all the connections, customer emails, etc.
In general the issue of commitment by the tech company to service competitors do have to be questioned. IBM purchased many firms like EDI, demand management (Sterling, DemandTec, Ilog and others) that are used by their competitors. And yes, over time it does appear that mutual ties that bind do loosen.