Consumer Products

Does Amazon Really Need to Buy Robots? (AMZN)

Amazon.com Inc. (NASDAQ: AMZN) has proven it has an ability to spend money on just about anything. Yesterday’s news that the online retail giant was going to spend some $775 million to acquire Kiva Systems Inc. is one thing, but there is a question that needs to be asked here in general: Does Amazon need to be buying robotic systems for shipping centers when so many online warehouse outfits use the same systems?

Kiva is a developer of robots used to operate shipping centers. The company notes on its site, “If a product is picked as eaches or cases to satisfy orders, a Kiva system will handle it more accurately, productively and cost-effectively than any traditional automation approach.”

So, the question is how much this will save the company through time. It claims to have a tripling of productivity and a one- to two-year return on investment. With it being in so many online retailing warehouses already, will Amazon.com decide which customers of Kiva it wants to keep and which it would only be helping compete against Amazon if it keeps them?

Maybe this will be a new profit-center for Amazon, but there is also a risk that Amazon could begin to stop servicing certain customers beyond the time frame of an existing contract. Who knows what Bezos is really up to and whether this will help Amazon’s already thin margins. Maybe if nothing else, this acquisition can help build Starship Bezos.

JON C. OGG