retail news in context, analysis with attitude

Yesterday, we reported on the launch of Amazon 4 Star, which was described as a new bricks-and-mortar store format in Manhattan’s Soho neighborhood that will only sell items that have gotten four stars or better on its website.’

We have pictures of the 4,000 square foot store below, and some more details on the format:

• Amazon says that the format is designed to be “a direct reflection of our customers - what they’re buying and what they’re loving.” All items in the store have a minimum customer rating on the site of four stars, with an average of 4.4 stars, and, collectively, more than 1.8 million five-star reviews.

• Product categories include Amazon-branded devices, consumer electronics, kitchen, home, toys, books and games.

• Prime members pay the Amazon price in-store; electronic shelf tags give Amazon the ability to do dynamic pricing. People who are not Prime members can sign up in-store for a 30-day free trial and instantly get the Prime price.

• Products not only are starred, but also are labeled with customer reviews - something that Amazon also did in its Amazon Books format.

• The store features a number of special sections, including “Trending Around NYC,” “Most Wished-For,” “Quirky Kitchen Gifts,” “Frequently Bought Together,” and “Amazon Exclusives” that appear to give Amazon the ability to change them out frequently.

• The company says this is not a pop-up shop, but rather another format that it is testing to see if it has legs … as in the case of Amazon Books and Amazon Go.

• This also is not a showroom - you walk out with the products you buy.

I was not actually in New York yesterday - I was in Austin, Texas, and then traveling - but I was lucky that my friend Patrick Spear, president/CEO of GMDC, was in Manhattan. Not only did he travel down to see the store and photograph it for me (those are his pictures below), but he also gave me his first-person reaction to the store, from the perspective of someone with a lot more inside knowledge than I have:

“Amazon 4-Star is the embodiment of the benefits of ‘big data,’ as Amazon has successfully aggregated local 4-Star+ user reviews to curate a locally-optimized assortment of general merchandise products. It seems they’ve built upon the merchandising concepts first deployed with their Amazon Book locations, including a liberal assortment of Amazon-specific products/platforms (Kindle, Fire Stick, Echo, etc.).

The Soho location carries approximately 2,000 SKUs (according to a store associate I spoke with). Using dynamic shelf tags, they have the ability to update pricing 5x/day, to ensure price optimization vs., and a dedicated team of Amazonians adjusts and curates the assortment based on user reviews to enable weekly updates to the store assortment.

“Amazon Prime members receive a 10% discount on most products, and customers using the Amazon app can pay for their purchases through the app.

“It’s not hard to imagine Amazon flexing their data-based assortment curation skills and scaling this platform, perhaps adjacent to or within Whole Foods locations. Once again, Amazon has raised the bar with their 4-Star format, a compelling example of “Retail Tomorrow.”

“From my perspective, this is yet another call-to-action for legacy brick and mortar retailers. Those involved with general merchandise categories need to give thought to how best to differentiate the in-store experience to continue to inspire their customers.

“To use your phrase, Kevin, it’s an Eye-Opener…"

KC's View:
What’s the old Mike Tyson line about “everybody has a plan until you get punched in the mouth”?

This strikes me as the kind of punch that Amazon is able to throw that most people just don’t see coming, and the kind of disruptive format that it has the ability to throw into the mix just to see what happens. And yet, as I said yesterday, it would be a mistake to think that this is random or frivolous or anything other than strategic. Among Amazon’s goals with this store are to a) test the parameters of its bricks-and-mortar ambitions, and b) learn more than it already knows about how to serve its customers.

In addition - and maybe even more importantly, I’d guess - the Amazon 4 Star will give it the ability to see exactly how targeted it can be in translating data about customers’ online shopping habits in a geographic area to a physical location. That has to be in the equation … and will give Amazon the capability of creating highly customized experiences neighborhood by neighborhood. It isn’t exactly like having everybody seeing a different home screen when signing onto Amazon online, but that has to be the goal.

To reiterate something I’ve said here before … I would urge folks not to see this in a vacuum, but rather as part of a broader continuum or ecosystem being developed by Amazon. That’s the point that Patrick Spear was making … Imagine if a store like this were opened adjacent to a Whole Foods store or, even more likely, a 365 by Whole Foods store … or were equipped with Amazon Go technology. It also could be attached to a pickup depot for Amazon Fresh, and could have a bank of Amazon lockers. Or, it could end up someplace that we cannot even imagine. (that’s probably the best bet…)

And while this isn’t a pop-up shop, imagine if this format was turned into a seasonal pop-up shop in malls all over America that have lots of vacant space and are just dying for a cool format like this to come in for the holidays.

And here’s the thing that I think ought to scare the crap out of people who compete with Amazon. They can prepare for all these possibilities, or just the things that they think are probabilities, and craft strategic plans and operational tactics to deal with them. And then, as has happened before, Amazon is likely to turn around and hit somebody in the nose with a punch that nobody sees coming.