Amazon – friend or foe for energy retailers?

As we’re navigating the Convergence, one company name keeps popping up into our conversations: Amazon.

Amazon’s achievement goes far beyond being a top global retailer. They have redesigned (i.e. disrupted) the direct-to-consumer business model and transformed the marketplace. Amazon’s fast delivery model (distribution), Prime program (consumer loyalty) and Fulfillment program (3rd party sellers/partners), are all enabled by a robust digital platform, advanced analytics and IoT—this is the foundation of its strategy. As a result, Amazon’s role has shifted from “seller” to “servicer,” seamlessly covering the end-to-end customer experience. This strategy triad, once in place, allows for instant access to new market segments at a near-zero marginal cost, further fueling the fast and lowest cost mantra. Consider the recently launched Amazon Fresh—less than 60 days after Blue Apron’s IPO. Almost overnight, Amazon Fresh started to sell out. Amazon “owns” the customer and is able to act quickly, giving them a huge advantage; almost impossible for competitors to overcome. Consider this:

  • Is there a player anywhere across the energy landscape equipped with the technology, distribution, wide customer pool, and sheer agility to compete at this level?
  • Are energy retailers with lots of customers and the willingness to take risks positioned to succeed in this changing energy landscape?
  • ​How can utilities adapt quickly, building on existing customer relationships to bundle and sell new services and products?
  • Will incumbents be willing to invest in new technology to lower their marginal cost, and thus thrive in a near-free electricity rate environment? Will they be willing and/or able to shift their model towards managing energy use more efficiently, and selling less rather than more electricity?

What can retailers, utilities, DER and IoT learn from a company like Amazon? No single company is going to have the answers, but I do know that conversations amongst executives of different backgrounds will help to illuminate how the energy industry can be more agile in the age of disruption. Please share your thoughts on our website, or contact us directly for a conversation.

Best,
Carole Barbeau
President of Energy Advisory – Americas
DNV GL

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