Will Amazon’s use of data transform how retailers operate stores?

Photo: Tom Ryan, RetailWire
May 24, 2017
Tom Ryan

How does Amazon Books differ from Barnes & Noble as well as the many book chains that have bitten the dust in recent years? Discovery and data.

That’s what Jennifer Cast, VP of Amazon Books, told a group of journalists Tuesday in a tour of Amazon Books’ first New York City store at Shops at Columbus Circle, its seventh store. (See photos on our Facebook page…)

The primary way Amazon is linking data to discovery is Amazon.com ratings. All books on display (except some best-sellers and new books) have ratings above four so customers “know these are great books.”

The ratings are showcased in special “feature” displays throughout the store. The most common shows ratings above 4.5 or 4.8 in themed sections (non-fiction, cooking, etc.).

Other sections include top fiction best sellers by reviewers in the New York City area, top books club picks from Goodreads and an abbreviated selection from Amazon’s “100 Books to Read In a Lifetime” list. Aimed at weekend readers, the “Page Turners” section consists of books read in three days or less by Kindle readers.

The popular “If You Like” section pairs a best-selling book with a suggestion for a similar reading experience. Going beyond “books also bought,” Amazon’s “curators” take in the tone of the reviews, Goodreads’ insights, other favorite books mentioned by those liking the title, as well as data around each author.

Ms. Cast stressed that Amazon’s curators employ “data with heart” in an “art versus science” approach to decide which books to stock. As a result, a number of highly-rated books on the selling floor are far from best sellers. Ms. Cast said, “Those are the kind of books we’re super excited about finding and helping customers discover.”

Other ways discovery is being emphasized is by only shelving books with covers face-out, although that limits the number of books displayed by more than half. Encouraging customers to scan books to see prices also encourages them to read descriptions and other reviews.

While Amazon Books also lets consumers try Echo, Kindle and Fire TV, Ms. Cast said the store capitalizes on “20 years of information about books and ratings from millions and millions of customers.”

DISCUSSION QUESTIONS: Will Amazon.com be successful in bringing its successful online experience to physical retail? What lessons might Amazon Books offer to other retailers for bringing consumer data to the in-store experience?

"Amazon will attract the curious and, if the experience is as enjoyable as it sounds, I am confident they will be successful."
"Online selling based on algorithms is a lot easier than physical merchandising."
"There is even more here — keep in mind Amazon’s Go store platform actually has you use the app to enter the store."

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27 Comments on "Will Amazon’s use of data transform how retailers operate stores?"

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Sunny Kumar

This is a another great example by Amazon of blended retail — using what they know from one channel to enhance another.

I think Amazon will be successful in integrating the mechanics of its online selling with physical selling, especially if they use that other trait; test and learn. No doubt they will closely observe what’s working and what is not and adjust accordingly, rapidly. After all, they have been pretty successful with that approach already!

Jerry Gelsomino

Data as to what is popular and implementing “If you like” suggestions in physical stores is very smart. Don’t forget a bargain book/cocktail table book section to simply catch browsers’ eyes. It’s my favorite bookstore section.

Art Suriano

Amazon’s physical stores have many opportunities for them to succeed. For one thing, customer curiosity will drive traffic into their stores. However the other advantage they have is that by opening new stores today it allows Amazon to start out with modern technology and great opportunities for the curious shopper.

I love the convenience of looking at a book, knowing its rating and finding other books that match my interests. Reviewing their store photos, it looks like Amazon has taken the best of the traditional bookstore and incorporated their new and innovative concepts. So for the many millions of us who enjoy reading whether it be on a tablet or a hardcover book Amazon will attract the curious and, if the experience is as enjoyable as it sounds, I am confident they will be successful.

Doug Garnett

In my visits to our local Amazon Books, this value Ms. Cast is suggesting seemed negligible. As I browsed the ratings weren’t evident and the titles were the same ones found in Barnes & Noble or our local independents (Powell’s, Annie Bloom’s).

While I respect Amazon’s search for smarter retail, I think Amazon is attempting to create a value story where one doesn’t really exist. Perhaps the similarity in titles with other stores reveals that choosing the most popular books doesn’t require online ratings.

I do think Amazon has more to bring to retail and hope we see more than mere gimmicks in the future.

Kim Garretson
4 months 28 days ago

This news is somewhat tempered by the news from Google yesterday about its use of data to track online behavior to physical retail purchases. If that is successful, Amazon may not be the only giant killer in tying online activity to in-store purchasing behavior.

Brandon Rael

Amazon will be extremely successful in transitioning their online experience into physical retail. The lines between the physical and digital shopping experience are being blurred and Amazon is on the precipice of dominating the marketplace with their ventures into the brick-and-mortar model. This is the age of the customer who is channel-agnostic and in complete control of their shopping journey. All of the transporting experiences and personalization will be driven by the extremely powerful consumer insights that Amazon can leverage to create a curated and regionalized in-store shopping experience.

The clear competitive advantages that Amazon can flex as they move to a brick-and-mortar model, both with the Amazon Books operation and ultimately the Amazon Go rollout, are their capabilities to leverage their business and customer facing technology, which is built all around the customer experience.

Unlike other large bookstore operations such as Barnes & Noble, Amazon does not have to be everything to everyone in their store locations. However they can provide finely-tuned, curated book assortments based on the customer insights, demographics, customer attributes and shopping behaviors/preferences in each local market.

Lyle Bunn (Ph.D. Hon)

Online selling based on algorithms is a lot easier than physical merchandising. Amazon will use this towards their goal of being the only retailer that consumers will need. Discovery and the sensory, tactile experience of the physical store or engagement center can drive brand engagement, which is the basis of Amazon’s growth and its supply relationships. So success for Amazon in physical retail is measured by “what we learned, how fast we learned it and how we optimized based on these learnings.” The interfaces with information and the way that Amazon engages communities of interest will be the most interesting areas of development.

Sterling Hawkins

There’s definitely a parallel of online sales optimization via algorithms and what can be done in a physical location. The difficulty of adjusting merchandising in a store is offset with the ability to have much richer data. Technologies are such today that they allow for an even more detailed view of customer interactions in-store than what can be seen online (sentiment analysis, etc.).

Mohamed Amer
Not only will Amazon be successful in bringing the online experience to the physical store, it will make the store experience even richer than the online one. The company is still working through how to bring the value created online to the physical store in a hybrid shopping environment. In this new model, the discovery-to-usage journey acknowledges the infinite moves across the physical and digital realms in any journey. Data is critical to the future of retailing. Aggregate data on products, usage and affinity come together with shopper-specific data to create a highly personalized and contextual experience. We are in the first inning of creating such an experience and Amazon is well on the path of building such a shopping environment as it executes its physical store strategy while leveraging the years of online data. Retailers are at different stages of preparing for this new retail model. What’s important is that in this new game, the sooner you invest in the right technology, begin to put your plan together, recruit the right team members and start practicing, the sooner you will be able to incorporate feedback and learning into the organization. This isn’t a “create once and forget,” but an… Read more »
Naomi K. Shapiro

Mohamed’s last paragraph says it all — succinctly and intelligently.

Ben Zifkin
4 months 28 days ago

When e-commerce was initially launched, you may recall that it mimicked real-world experience but in a digital world. As certain characteristics of the digital world became more apparent (i.e. the ability to track customers and gather behavioral data), the online experience changed. Historically, real-world retailers have been lacking in (real-time) data compared to online. As this changes, you will see the experience change. It won’t be Amazon’s influence per se but they will be a prime example. There is an entirely new generation of consumers growing up digitally native that is expecting a different experience. Just ask my five-year-old son who went up to a paper city map and tried zooming in by pinching his fingers together.

Ricardo Belmar

In typical Amazon fashion they are attacking what they see as a significant source of friction in the shopping journey by applying their online, data-centric approach to retailing. With Amazon Books they are trying to provide a unique discovery experience that I feel is lacking in most bookstores. Ask yourself — the last time you walked into a book store, did you already know what book you wanted to buy or did you actually browse, hoping to find a unique read? Amazon is trying to create a store where customers who know what they want won’t need to enter — they will buy online. Customers who want to explore in a physical, tactile way rather than staring at a screen will enter Amazon Books and walk out having purchased something unexpected. This experience will be memorable and will keep shoppers coming back. That’s what Amazon can teach other retailers with this store format.

JJ Kallergis
Amazon is sitting on a treasure trove of consumer data. No retailer out there is even close to them with the quantity of reviews across such a wide variety of products. This will help to develop a strong sense of credibility and trust with the consumer, which will in turn remove friction from the purchasing process. Walmart has the potential to close the gap across all items but especially in grocery. Google and Facebook also have the potential to disrupt retail even further by leveraging AI, machine learning and other technologies to close this gap of information and provide the customer with the most transparent view about the products that she is considering to purchase. It will be interesting to see how these technology leaders reach out to retailers and help them connect the dots to better compete with Amazon as Amazon starts entering the physical retail space more aggressively. Other consumer service segments (i.e. restaurants, hospitality) already have technology providers that help connect the dots like Priceline, OpenTable and Yelp. So in the future I strongly believe that the brand narrative for all those items in retail will be driven more by consumers and less by the brand managers… Read more »
Herb Sorensen

Notice that Amazon’s prime focus is on what we call top sellers. That is, across the shopping crowd, the book that is overwhelmingly favored BY THE SHOPPERS! What a concept! Other brick-and-mortar retailers think they are really clever by NOT calling out what shoppers mostly want to buy, thinking that “forcing” them to search may lead them to buy something else, too!

For brick-and-mortar retailers this is an insane anti-sales strategy that has lead to industry-wide suppression of sales. Look at their business model and it all makes sense. Their number one source of profits comes from their SUPPLIERS, NOT their customers. (And guess who is expecting their suppliers to come give them relief from the relentless assault by Amazon?)

And so brick-and-mortar retailers are sitting ducks just waiting for Amazon to continue gorging on THEIR businesses. The difference is that Amazon actually focuses on the shopper, not the supplier. There are a few brick-and-mortar exceptions, Costco being the preeminent example. Hmmm! So Costco is now the number two global retailer according to Kantar’s latest rankings. Did you notice all the sudden attention to what Costco is doing? Me neither. It’s “crickets” from an industry absorbed by their own losing thoughts.

Stefan Weitz

There is even more here — keep in mind Amazon’s Go store platform actually has you use the app to enter the store. That means it has much more than simply purchase history — that means it can determine the amount of time dwell you spend in front of items as you browse the store. It means they can connect all virtual and physical purchases under a single profile. It means they can augment their physical locations with the data gleaned and mastered in the digital world.

Karen S. Herman

Other retailers can learn from Amazon Books to present an exclusive and highly-curated selection of products, encourage shoppers to use their smartphone for information and education and provide the opportunity to touch and feel their most innovative products. Apple started this experiential retail model years ago. Many retailers have followed it.

The difference here is data. What Amazon does with data, churned through machine learning algorithms and AI, is both daunting and brilliant. Few retailers can compete.

It’s the consumer who wins. Amazon Books provides a unique value for the shopper who wants a data-driven selection of books to choose from and doesn’t want to wait for the delivery to her doorstep.

Cristian Grossmann
Cristian Grossmann
4 months 28 days ago

I think this will be a successful venture for Amazon. Customers desire personalization and Amazon does a great job of turning Big Data into a physical experience that is highly tailored to the customer. Amazon customers buy books online for the convenience and reviews (which is another convenience because people have already done the research for you). By putting the reviews front and center in the stores it’s still not as convenient as delivery, but it’s putting the magic back in bookstores and providing more value than before. The future of retail consists of employing creative strategies like these that humanize Big Data. Because in the end it’s real people who are buying the products so your analytics won’t be as valuable without a humanistic approach to how they’re used.

Lee Peterson

This is the store of the future. The 50-year-old ROI model for physical retail is pretty much dead in the water. The struggle going on now for most of the over-stored retailers is just that — they’re up against an old numeric system that desperately needs to change. The store of the future will provide exactly what Ms. Cast described — discovery and data. Notice that she didn’t say “profits.” That’s going to come from prolific online offerings where people buy things.

It’s a new dawn!

Kenneth Leung

E-commerce retailers are by definition data-heavy since they benefit from the rich data tracking of the customer journey to the website and the ease of getting shopper feedback. It is interesting to see them leveraging it to store-level merchandising. The issue with brick-and-mortar retailers replicating that is that their e-commerce section may not yield a big enough sample size to generate the insight needed for store merchandising.

gordon arnold

I’m not too inspired by words of wisdom from the only surviving bookstore in town. The brick and mortar retailers that are not funded by banks and investors to find profitability must face entirely different obstacles in the current 21st century’s hostile competitive market. The data they are looking to increase sales with comes from out of stock reports, cost of goods sold reports, open to buy reports, shrink reports and the usual assortment that may be unique to their retail market type. In the search for new relevance and results-oriented reports, anything that will get more consumers in the store(s) is the need for the now.

Jeff Miller

I have not visited an Amazon book store yet, but I believe they will be successful for a few reasons and also with one caveat. The caveat is that in brick and mortar is still all about location, location. location. So if they choose good spots they will do great. Not sure that an Amazon Book store will be a destination that anchors a place so they need to choose wisely.

They will be successful because:

  1. Using mix of “data with heart” is a great way to use tech and people for an enhanced experience
  2. They truly have an endless aisle with every other title under the sun available if not stocked ready for next day delivery or incentives for people to buy Kindle or Audible version and then upgrade to Kindle or Alexa for better experiences.

Other retailers especially omni-channel retailers should certainly pay attention and learn from Amazon on what they are doing to be customer-centric both online and in stores.

Scott Magids
4 months 28 days ago

Retailers have always sought to draw on insights to strategically locate items in-store, with insights ranging from anecdotal and “gut feeling” instincts to big data driven analytics gathered from point-of-sale customer data. Few retailers have as much big data as Amazon.com, and Amazon’s deep experience in analyzing data trends and in guiding the customer experience will play well in their success in the physical world.

Amazon’s ventures – not just in the physical bookstore, but in other brick-and-mortar ventures like Amazon Go – represent a new type of seamless online/offline convergence that other retailers must appreciate and embrace, or perish. This seamless convergence is at the heart of understanding the emotional triggers that cause consumers to buy, and to remain loyal to a retailer.

We’ve reached a state where it’s not a choice between online retail or physical retail, rather, it’s about achieving an equal balance that meets the emotional needs of all customers in a very personalized way.

Min-Jee Hwang

I think Amazon is perfectly positioned to do well in brick and mortar, even when others are closing stores and slowing investments. Amazon has a wealth of data that gives them a good idea of what shoppers will want based on past purchases and what other shoppers have bought together. In-store shoppers want to know what others think of products, so showing them easily instead of them having to do the research of their own is a step in the right direction. These are things that employees used to tell shoppers: what new products they might like, what’s popular, etc. Now Amazon is employing data for that role, making it more of a science than an art. Since this new store is Amazon’s 7th, clearly this model is working well for them.

Shep Hyken

With as much data as Amazon has, it can do a good job of predicting sales, consumer behavior and more. It’s not based on hundreds of customers and their purchases — or even thousands. It’s based on millions of consumers who have contributed to the data that helps Amazon make smart decisions.

Kevin Merritt

Great comments here. For sure, Amazon has huge assets as most have pointed out: customer data, scale, and brand equity. Yet, it takes a lot more than data to be successful in brick and mortar, right? I am curious to see how many product segments this can translate to. And can Amazon foster the culture at their stores required to attract great employees who will create positive experiences (Apple/Starbucks)?

In the past, Amazon has had its own struggles attracting the needed talent — in their FC’s, for example. At the least, I see some strong residual benefits associated with having a physical presence in communities if they can avoid the potential onslaught of reverse logistics. I very much look forward to seeing how this plays out.

Cate Trotter

I’m sure the store will be a success. If nothing else Amazon has the resources to just try it, even if it fails. The approach seems solid though. Amazon is making good use of all that data that it has but, importantly, the shopping experience seems good for the customer as well. I’m sure others will be paying close attention, but being able to replicate the same approach might be hard for those without Amazon’s levels of data.

Although Amazon’s way of doing it sounds a bit “colder,” curation is an increasingly important part of the physical retail experience. If you know what you want you can can buy it online in a couple of clicks. If you want to be inspired or discover something then starting with a curated selection of products gives the customer confidence that they’ll be likely to buy something good.

Bill Hanifin

Amazon’s physical book stores can offer another “Trojan Horse” towards their larger entry into the brick and mortar retail space. I believe Amazon will turn browsing and purchasing books into an experience that consumers will enjoy to pass some time. In the process, Amazon can seed the stores with coffee, wifi and highlight rotating displays on items they wish to feature. The stores can be smallish, while becoming a place of discovery, fun, and encounter for shoppers.

"Amazon will attract the curious and, if the experience is as enjoyable as it sounds, I am confident they will be successful."
"Online selling based on algorithms is a lot easier than physical merchandising."
"There is even more here — keep in mind Amazon’s Go store platform actually has you use the app to enter the store."

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