The arrival of Amazon.com first posed a threat to the likes of JB Hi-Fi Limited (ASX: JBH) and Harvey Norman Holdings Limited (ASX: HVN) before speculation emerged that it would next target supermarkets.
Now the US-listed online retail titan is venturing into convenience retailing, which could eventually put it in direct competition with Caltex Australia Limited (ASX: CTX).
Perhaps not by coincidence, the share price of Caltex is down 1.7% to $29.20 in after lunch trade when the S&P/ASX 200 (Index:^AXJO) (ASX: XJO) is 0.3% lower.
Amazon is planning on launching as many as 3,000 new AmazonGo cashier-less stores in the next few years in the US, according to Bloomberg.
The success of the rollout will almost certainly see the company opening such outlets in Australia where consumers can buy ready-made meals and snacks, as well as some grocery items, in small format stores without the need for cash.
Shoppers will gain access to these stores with their mobile phones and cameras and sensors inside the store will record items they grab. These shoppers can walk out of the store with the goods and their accounts will be charged automatically.
Caltex Australia is banking on an improved convenience retail offering at its petrol stations to drive elusive growth and has teamed up with Woolworths Group Ltd (ASX: WOW) to achieve this goal.
Caltex is already facing one "disruption" with the growing popularity of electric vehicles threatening its fuel processing and retailing business.
It now must deal with another powerful disruptor in the shape of Amazon, although the US giant still has a few kinks it needs to iron out with AmazonGo.
The first, and biggest, issue is cost. Bloomberg reports that it will set Amazon back $US1 million ($1.4 million) for every new store in hardware alone. New technology is never cheap!
The second issue that Amazon has yet to work out is the product mix. AmazonGo will offer freshly prepared food but it isn't clear if it will sell other items. Ready-made food commands a high margin but profit on grocery items are skinny.
Furthermore, having takeaway food only requires fewer cameras and sensors, which in turn means fewer capital costs.
This is why getting the product mix right will be key as this will affect the pay-back period for the new convenience store network.
Amazon will need some time to figure all these challenges out and that will buy Caltex time to formulate a response in Australia.
The bad news for Caltex and Woolworths (given they still own their petrol station and convenience store business since failing to sell it to BP) is Amazon.com has deep pockets and isn't afraid to lose money for an extended period to build a business.
A rollout of AmazonGo stores in Australia will also likely have a negative effect on bakeries and fast food operators like Retail Food Group Limited (ASX: RFG) and Collins Foods Ltd (ASX: CKF).
