Amazon acquires robotics group Kiva for $775m – trend to vertical integration continues apace

By March 20, 2012 3 Comments

Yesterday Amazon announced the $775m acquisition of robotics group Kiva Systems. These squat orange robots automate part of the shelf picking process for ecommerce companies. Instead of the workers walking to the shelves, the robots bring the shelves to the workers who then stay in the same place. With a robotics system in place one human can do the work that would have taken six previously. It turns out that shelf pickers do a lot of walking – up to 20 miles per day in Amazon’s warehouses. There is more detail in the video above. If you like robots you will enjoy this video, and if you don’t like robots you should watch it anyway. The humans and robots work together in a nice co-operation. We will see more and more of this type of co-operation.

This is interesting because it is another move by a major internet company to vertically integrate its value chain. This is a strategy also employed by Google and Apple, and this acquisition by Amazon has echoes of Google’s deal last year to buy Motorola’s handset division. Just as Google’s deal creates concerns that it won’t in the future play fair with other handset OEMs who use Android so Kiva customers that compete with Amazon will worry whether whether they will get the same service going forward. You have to think that the reason Amazon wants to own this technology is to stop their competitors using it – particularly eBay/GSI and Walmart. Or maybe they were worried that eBay/GSI would buy the Kiva and stop Amazon using it. (Amazon is currently a customer via it’s acquisitions Zappos and Quidsi, but doesn’t use Kiva in it’s home grown warehouses.)

My guess is that this is another phenomenally aggressive move by Amazon. They have brought significant extra complexity into their business and will now have to learn how to manage a robotics company on top of all their other disparate businesses, and the only reason to take on that complexity is to crush the competition. It makes me wonder where they will go next. Perhaps they will buy Fedex…..

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