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Amazon enters Singapore

The guilt of shopping at Amazon

By going online to shop for groceries and household goods, am I aiding in the killing of Singapore's retail icons like NTUC FairPrice, Cold Storage, Sheng Siong and HDB shops?

I like going to supermarkets, browsing the aisles in pleasurable anticipation of the delectable meals that can be fixed, or the crunchy snacks I can munch on. I've never seen the point of shopping for groceries online.

Then, on Thursday (July 27), Amazon announced its foray into Singapore, the beach head of its entry into South-east Asia, with the launch of a two-hour delivery service.

When the news flashed across my computer screen, it was lunchtime. I needed a break. I downloaded the Amazon Prime Now app. Within minutes, I was scrolling through the easy-to-use app and clicking. Before I knew it, I had a cart full of items. Ads promised a 10 per cent discount. I applied the promo code and got my discount. I keyed in my Amazon account information and up popped my credit card details and delivery address. It was so seamless, I ended up making my first grocery online purchase with little effort.  

Then, the questioning and guilt set in. What had I done? Was I aiding a foreign e-commerce company to kill off local retailers?

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In the days before Uber and Airbnb disrupted businesses, I was a happy online shopper and net user. These days, I know better.

The big tech companies are platform companies, providing a marketplace that matches sellers to buyers of goods. This can be immensely empowering - think the low-income women in third world countries weaving crafts that can be sold to first world corporate customers, for example; or the millions of migrants who can't find jobs in their host countries but can suddenly become Uber drivers, or the socially awkward geek who can't hold down an office job but can sell his computing skills online. In the early days, disintermediation was a good thing - it got rid of go-between companies and matched vendors to buyers. 

But that was the age of innocence.

These days, we know that platform companies disrupt businesses in a big way, and can cause massive losses of jobs. Uber is driving taxi companies out of business - and taxi-drivers' livelihoods are threatened. In fact, Uber itself has said self-driving cars is its aim, which means Uber drivers' work lifespans is also limited.

Social media platforms like Facebook and Twitter bring the tools of publishing straight into the hands of citizens, disrupting the mass media business, and putting tens of thousands of journalists, sub-editors, type-setters, newspaper vendors,  out of jobs. Those of us in the media business live with the reality of disruption each day. We know the anxieties it brings, as well as its potential to unleash creative ways of redoing our core business, which is reporting and analysing the news and telling stories of people. 

Retail is now facing that tsunami. 

As a shopper, I want to use my grocery dollar wisely.

I don't want to support Amazon, or Alibaba and RedMart, and inadvertently cause the death of the local retailers I like. I like supermarkets. I have a steady, long-term relationship with NTUC FairPrice. I get tired of it sometimes and grouch that it  takes me for granted. Then I seek out my on-off flirtation with Cold Storage and bask in its courtship. I'd actually hate for either to close down.

I also want to support our local HDB stores. I have a favourite fruit man whose tattooed arms pick out cherries, grapes, and  peaches that are  invariably juicy and sweet. I point, he picks, I never bargain. I also enjoy going to the HDB estate near my apartment to browse the amazing array of wares in the ubiquitous household goods stores. So many colourful containers of all shapes and sizes; every kitchen utensil I never knew I would have a use for; all manner of brooms, brushes, laundry baskets, cleaning tools. I have spent many pleasant evenings lost in those aisles, emerging happily an hour later to pay for some item I will  hardly use. 

Now that I've discovered the convenience of online grocery shopping, will I push these stores to extinction faster?

That was my topmost guilty question.

Next, if I am to shop online for groceries, should I go with Amazon or Alibaba and its online grocer partner RedMart? 

As a consumer, I feel a little like Singapore, caught between the two big superpowers China and the United States.

Like Singapore, I don't want to be forced to take sides between American Amazon and Chinese Alibaba. I want to be friends with both. I want both to be around, so that they can push local companies to improve, and can compete with each other, and improve consumer choice and customer experience.

The two e-commerce giants have different business models. Both are big conglomerates whose remit go far beyond e-commerce to e-payments (Alibaba) and cloud servers (Amazon). But for its e-commerce operations, Alibaba is mainly a marketplace for third party sellers. It takes a cut from these sales. Amazon's core e-commerce business is to sell products directly through its online portals. It started with books and music, and now sells households goods, electronics and groceries. It has even developed its own housebrand, Amazon Basics.

When I buy something from Alibaba, some small China company might be the one making the product and making a profit. When I buy something from Amazon, most times, the profit goes mainly to Amazon. 

According to a very interesting article in TechinAsia that compares the two countries' business models, "Amazon earns $1 in revenue for every $2.30 in merchandise it sells, while Alibaba has to sell $28.10 in merchandise to earn that same dollar."

Should I be backing Alibaba's model that at least lets many small businesses make a profit? But then many of those companies making profits are from China. While Alibaba's boss Jack Ma says its marketplace is inclusive, and spins its logistics hub in Malaysia as a gateway for South-east Asian merchants to sell to China customers, it's more likely that the flow of goods and benefits will be the reverse. 

Even as I write this, however, I know the part I play as a consumer in this phenomenon is miniscule, and I know the end game will not be pretty for retail. 

Amazon Prime Now in Singapore started modestly, with about 20,000 products from food to beauty products to household goods. The average supermarket stocks about 50,000 items. Even with such a modest inventory of items, demand overwhelmed its ability to deliver within the promised two-hour window. I had to opt for next-day delivery.

Singapore supermarket shares fell on Amazon's launch. The Business Times reported that shares of Sheng Siong slid 4.5 per cent on Thursday to S$0.95. Shares of Dairy Farm International, which operates Cold Storage, Giant, 7-Eleven and Guardian stores here, fell 0.4 per cent to US$8.14.

The Financial Times had a chilling article this month saying that some analysts see retail as the "next big short".

With online shopping sounding the death knell for retail, mall developers, supermarkets, shops and every other associated business, analysts are predicting that share prices of these companies will drop, and some are betting on it, in the same way that some hedge funds made a lot of money betting that the US housing market would fall with sub-prime mortgages.

The article said: "The relentless rise of online shopping is posing a huge challenge for US shopping malls, developers and investors who own shares and bonds in household names. The core problem is a dramatic overbuilding of stores, coupled with the rise of e-commerce, Richard Hayne, Urban Outfitters’ chief executive, told analysts on a conference call earlier this year. “This created a bubble, and like housing, that bubble has now burst,” Mr Hayne said. “We are seeing the results: Doors shuttering and rents retreating. This trend will continue for the foreseeable future and may even accelerate.”

Analysts are nearly unanimous in saying that shopping in future will entail a mix of online and brick and mortar experiences. Many of us still like to be able to see and touch what we buy. The future of retail malls probably lies in offering experiential and different concepts of shopping. 

My ideal supermarket would be one with a stripped-down range of goods. The space freed up will be filled with large activity areas with cooking, slicing, stir-frying cooking demos, and lots and lots of free food tasting with drinks. I won't need to drag a trolley around. I'd saunter in, scan my membership card, and click Yes when it asks me if I want to replenish my usual orders.

Then I'd head over to the food tasting stations and snack my way through the options, before deciding which new products I want to buy. All my orders will be consolidated when I check out and pay. If I want to self-collect my goods, I just key in my car park lot number and a robot will deliver it to my car. Otherwise, I'll pick a home delivery time before heading off to my next appointment.