Recently, several news outlets shared Bill Gates' prediction that Amazon (AMZN -1.27%) could face its end if artificial intelligence (AI) continues to advance at its current pace. Gates implied that AI-powered personal assistants could eventually read people's minds well enough to replace the need to use online retailers, as these personal assistants will know what we need and complete shopping tasks on our behalf, such as ordering products and arranging delivery.
However, it is considerable speculation to believe Microsoft-backed OpenAI's ChatGPT or Alphabet's Bard could destroy Amazon's e-commerce operations. It is unlikely that an advanced AI-Chatbot alone would be enough to destroy the company. Here's why.
Amazon's situation is less dire than Bill Gates implied
Amazon has several advantages over any company intending to use AI in e-commerce. First, it has the most extensive consumer data set to train its AI systems. With over 300 million customers in 180 countries, it has a huge advantage in creating a generative AI virtual assistant. Generative AI is a type of artificial intelligence that can make new data, such as text, images, or music, based on existing data. The more quality data a company trains a generative AI model on, the more accurate the results. Once Amazon eventually introduces a generative AI shopping assistant to the market, it should exceed the capabilities of most competitors' shopping assistants.
Second, it has invested heavily in AI for over 25 years, building a team of world-class engineers who are experts in various AI disciplines, including machine learning, natural language processing, and computer vision. Amazon's AI team is responsible for developing many of the company's most popular AI-powered products, including Alexa, Amazon Go, and Amazon Rekognition.
Finally, Amazon is more than just another e-commerce platform. It also operates a logistics network that is on par with United Parcel Service in delivering a package from a seller to a buyer's location, a significant competitive advantage that adversaries will not easily overcome with a good chatbot.
Amazon's most significant threat
Walmart is Amazon's most serious threat as it has several attributes that could prove a painful thorn in Amazon's side.
First, Walmart has nearly 5,300 stores in the U.S. market. In comparison, Amazon currently has a little over 1,100 active fulfillment centers in the U.S., giving Walmart a massive advantage over Amazon in terms of reach and convenience. Walmart's customers can elect to have items shipped from stores, quickly pick up online orders at a nearby store, or return items in person if unsatisfied. Thus, it is one of the few companies able to counter Amazon's logistical advantage.
Second, its focus on innovation is every bit as strong as Amazon's. In 2011, it established a technology division called Walmart Labs, which eventually became Walmart Global Tech in 2016. This division boasts at least 20,000 employees and is comparable to Amazon's technology division in terms of quality.
Last, it serves 240 million customers weekly, giving it a large enough customer dataset to build generative AI products that should be as good as anything Amazon produces. Walmart is already building generational AI into its products. For example, it uses that technology in its text-to-shop service. This new service allows customers to shop Walmart's entire inventory via text, whether a weekly grocery order from a nearby store or an e-commerce order a person wants to have shipped to their home.
AWS is its ace in the hole
Amazon owning AWS gives it a significant advantage in generative AI, as AWS is the world's leading cloud computing platform, which provides many benefits in developing and deploying generative AI. For instance, AWS provides access to vast computing power and storage, essential for the training and deploying of large language models (LLMs) used in generative AI. These LLMs can require petabytes of data storage and thousands of graphics processing units (GPUs). Additionally, AWS provides Amazon with a global network of data centers to efficiently deploy its generative AI applications to a worldwide audience.
The icing on the cake is that AWS provides the company with a large community of developers and users. This community can provide it with feedback on its AI applications and help Amazon identify new opportunities to use AI.
A few specific generative AI applications that AWS is already deploying are Amazon Lex, which helps developers build conversational interfaces that understand natural language and generate text responses; Amazon Polly allows developers to transform any text into human-like speech; Amazon Rekognition can identify objects, people, and scenes in images and videos. As AI continues developing, Amazon will likely play an increasingly important role. The company has the resources, expertise, and commitment to be a leader in AI.
The best part is Amazon's e-commerce operations greatly benefit from the AWS team's AI expertise. The e-commerce platform uses AI to personalize the shopping experience for its customers, improve customer service, improve logistics operations, detect and prevent fraud, and provide other advantages that should enable this company to remain a top e-commerce retailer well into the foreseeable future.
