Will Amazon disrupt retail again with its new 4-star store concept?

Discussion
Photo: Jordan Stead, Amazon
Sep 27, 2018
George Anderson

Amazon.com is opening a new brick and mortar store concept today in New York’s SoHo neighborhood that sells items rated four stars or above by the company’s online reviewers, along with top sellers and new and trending items from the site.

Amazon 4-star, as it is named, is a permanent physical store location — not a pop-up — that will use data from its site to tailor SKU selection to meet the needs of local customers. A story on Amazon’s day one blog said the store’s “selection is a direct reflection of our customers — what they’re buying and what they’re loving.”

The store will feature products from some of Amazon’s most popular categories, including books, consumer electronics, games, home, kitchen and more. The average rating of products sold in the store is 4.4 stars with no items falling below four.

Signage will draw attention to items that fall into various merchandising categories such as Most-Wished-For, Trending Around NYC, Frequently Bought Together and Amazon Exclusives. Amazon is also displaying customer review cards from its site to better inform and influence purchasing decisions and is using digital shelf tags to show prices.

Will Amazon disrupt retail again with its new 4-star store concept?
Photo: Jordan Stead, Amazon

Amazon is also featuring its own Echo and Fire brands along with dozens of products and accessories that incorporate the company’s Alexa voice tech. Customers in the store will be able to try out a variety of electronic devices.

In the same strategy Amazon has employed in its book stores, Prime members will pay the same price as they would online, while non-members will pay the list price. Customers in SoHo who aren’t Prime members can sign up for a free 30-day trial membership in-store.

Will Amazon disrupt retail again with its new 4-star store concept?
Photo: Jordan Stead, Amazon

While product selection in the 4-star location will be informed by online purchasing behavior, a Wall Street Journal article points out that data gathered from the store will also benefit Amazon online by providing it with data about how customers shop in a physical environment, something it does not have access to through e-commerce activity.

DISCUSSION QUESTIONS: What do you think the 4-star concept will mean for Amazon and its rivals? Do you think Amazon will follow a rollout strategy for 4-star similar to what it has done with its book stores and AmazonGo or will it take a different tact?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"This is brilliant. Products curated by consumer input and some hefty data analytics."
"Bravo! Let’s call this a store “By the people, for the people” on a local basis."
"This is a perfect formula for ANY brick-and-mortar store. Do you think that 100 years of bricks success will forestall anything but cosmetic responses, like click and collect?"

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29 Comments on "Will Amazon disrupt retail again with its new 4-star store concept?"


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Mark Ryski
BrainTrust

Not every move represents “disruption” – I think the industry has become mildly hyperbolic when it comes to Amazon. The 4-star concept is very interesting and represents yet another experiment in Amazon’s expanding retail ecosystem. The fact that the product mix is based on actual customer 4-star ratings is very cool. As far as rivals are concerned – it’s only one store, so I don’t think this will make Amazon rivals any less concerned that they already are. Ultimately, consumer acceptance will determine how far and fast this concept goes. I think this one has legs.

Lee Kent
BrainTrust

I agree with Mark that not every move represents disruption. I am familiar with several retailers who have curated their in-store items based on most popular, etc. from social media sites. I believe they have seen some lift and gleaned some learnings, but nothing disruptive. What’s trending is often fun to know, but is that what motivates the purchase? Not always. For my 2 cents.

Neil Saunders
BrainTrust

It will be fascinating to see where Amazon takes this concept as it clearly ticks a number of important boxes in terms of retail trends. First, it is localized. Second, it is data-driven. Third, it is curated. And fourth, the assortment will regularly change based on what’s new and popular. That should, in theory, give it destination status and drive repeat traffic – at least from people who want to browse and explore.

This being Amazon, there is also a feedback loop. These stores will gather data, possibly be places were online orders can be collected, and eventually act as mini-hubs in Amazon’s distribution networks.

Above all, Amazon’s fascination with physical retail shows, once again, that shops are not dead. Only bad shops are.

Nikki Baird
BrainTrust

This is brilliant. Products curated by consumer input and some hefty data analytics. In a recent (rare) interview, Bezos claimed that Amazon is not a data company. He doth protest too much. Amazon is totally a data company, and this is evidence of both consuming it and gathering more of it, in ways retailers should be watching.

The only caveat to all of this is, there does have to be some cohesiveness to the assortment. I don’t think this will have long-term appeal if it’s just a bunch of random stuff on shelves. The commonality of being highly-rated doesn’t seem strong enough to hold a story together, when it comes to having the store “speak” to consumers.

James Tenser
BrainTrust

Excellent observations here. Four stars do not a coherent assortment make. Something about this reminds me of the “as seen on TV” display of various clever products in my local CVS. I have a hunch that Amazon is going for more of a “Sharper Image” vibe with 4-Star. Perhaps they have concluded that Alexa and Fire products cannot justify an Apple Store-like environment on their own?

In a compact physical footprint, even those highly-rated items will need to be intensely curated. The 16-pack of Bounty Quick-Size paper towels earned a 4.8 rating on Amazon.com, but I’m willing to bet there’s no room for that item in this new retail concept.

The merchants among us know well that selecting items for sale is much more than a numerical exercise. Amazon has the monumental advantage of making its selections from the best-documented product roster in retail history. So yeah, this is a data play. The first data I’d like to see from 4-Star will be how many items in an average basket? My prediction is less than two.

Lee Peterson
BrainTrust

This is such a no-brainer. A “best sellers” store. Sure seems like someone like Target or Walmart should’ve thought of this first, eh? “Our online best sellers” section. I like the flea market aspect of it as well as you may run across items you never thought of buying or just have fun seeing that others buy a lot of. That alone could be quite humorous. Fail fast! Great idea.

Jeff Sward
Guest

Hmmm … a retail store with product ratings. Consumer Reports + Brookstone + localized data = Amazon 4-Star. Of course….

Art Suriano
BrainTrust

I think this is a brilliant idea. Today we are bombarded with so much competition, and yet Amazon has managed to create something that is different. I don’t know if Amazon 4-Star will be a huge success, but it will attract curious shoppers many of which are already loyal Amazon customers. It will also help Amazon sell Amazon Prime to non-members because the customer will see the discounts. There have been many retail stores that have succeeded by using a novel idea however they come and go like Sharper Image and Brookstone. So Amazon 4-Star may have limited success and only time will tell. However, knowing Jeff Bezos, I doubt this will be a flash in the pan.

Brandon Rael
BrainTrust
This is clear evidence that the retail brick-and-mortar store is as relevant, viable and critical as ever. While this will more than likely not be the disruptive force that people think it will be, Amazon’s intentions here are clear. The store will reflect the local NYC SoHo community, and leverage all those valuable consumer insights within their curated assortments. In addition, as we have seen, even with all the ease and comfort of shopping on digital platforms, physical retail space is evolving into a storytelling medium, where the lines between the creative art and commerce worlds are blurring. Amazon has demonstrated that they are upping their game, and willing to drive the innovation curve with their latest announcements in the past 10 days, which include: 1.) A modular home builder, 2.) A strategic partnership with Snap 3.) A major partner in India’s leading supermarket 4.) A personal shopping assistant 5.) potentially adding more than 3,000 Amazon Go stores. With all of that said, perhaps these moves are in response to the competitive pressures coming from… Read more »
Shep Hyken
BrainTrust

Wouldn’t it be nice to know that everything in a store had high consumer ratings? That there were no shoddy or questionable products? It’s data to help a consumer make a decision. And knowing a product won’t make it to the showroom floor if it doesn’t hit a standard could be good for everyone.

Doug Garnett
BrainTrust

Good for Amazon – that they continue to work to improve margins by embracing bricks.

But they are distracted by digital and data mythology.

Stores won’t be stocked well by ratings. A human buyer can curate an interesting mix that’ll always beat the blandness of “highly rated” or data driven curation.

Curation is partly a creative endeavor – including some interesting products with no history. Only a human being can crack that code. Otherwise, all stores will be blindly identical in mix.

Jeff Sward
Guest

This is one of the best ideas I have seen in a long time. An absolute forehead slapper for other retailers … why didn’t I think of that? I’ll actually tell my customers what the most popular items are. Transparency. Everlane gave us a lesson in transparency. And with Amazon’s ability to (highly) localize the content, this can be a hugely profitable initiative.

Anne Howe
BrainTrust

I like the idea of a physical and emotionally tangible connection to a shopper-curated collection of products that Amazon sells. Even better, I love the possibility of surprise discovery and new product offerings. I hope they staff the store with people trained in making experiences come to life in fun and engaging ways.

Bob Amster
BrainTrust

If this concept works, it will serve to drive up sales per square foot (which need to be pretty hefty in SoHo and similar neighborhoods). Amazon gets the input from it website, and then — as Nikki says — curates an assortment of “sure sellers.” Clever!

Dick Seesel
BrainTrust

I’m not sure the net result of Amazon’s store concept — items curated based on popularity and consumer ratings — is much different from what should happen when a well-run merchandising organization makes the same choices. After all, what buying team doesn’t aspire to an assortment full of best-selling items? (And yes, it doesn’t always happen that way.) What distinguishes Amazon 4 Star is the “treasure hunt” element, which has been a secret of the off-pricers’ success. It’s going to keep customers coming back week after week because it eliminates the boredom factor.

Matthew Stern
Staff
I’ve got a few thoughts on this one that seem to run contrary to most of the opinions in the discussion today, but I’m always happy to reconsider! 🙂 I think this concept says more about Amazon continuing to recognize that shoppers want brick-and-mortar stores than anything about Amazon’s ability to succeed in it with this hybrid model. I am thinking back to when a friend of mine told me about her visit to Amazon Books when it first opened — her account of the visit reminded me of the “Uncanny Valley” experience people describe when they encounter a robot that is supposed to look human but is somehow “off” in a way that’s unnerving and destabilizing. She said, “it’s not a book store.” I could see this store having the same quasi-lifelessness she described. I see it in the anonymous, user-generated product endorsement cards like the one pictured — something about them strikes me as almost spooky. I also think the reliance on star ratings has some blind spots. Ratings can be useful in… Read more »
Rich Kizer
BrainTrust

Bravo! Let’s call this a store “By the people, for the people” on a local basis. Customer endorsements certainly create emotions in potential buyers’ minds — it works. We always stress to every retailer we work with to let their customers speak through in-store signage and multimedia endorsements, as well as placing those same messages online.

Ken Morris
BrainTrust
First and foremost, the physical store is not dead! It is great to see the renewed interest in brick-and-mortar stores and Amazon is making a full court press. As Amazon continues to expand its store presence from book, to grocery and convenience and now to stores focus on trending/hot products from its online commerce nearly all retail segments should be on high alert. I believe they will rollout this concept across all metro areas. It isn’t a gimmick, like Amazon Go, but a sustainable concept based on localized assortment. The question is how localized? Will they add these to their Whole Foods locations? For a few years, there have been rumors of Amazon expanding into gas stations and they have been focused on expanding their presence in apparel, furniture, pharmacy, which might evolve into physical stores in these categories. With more than 100 million Amazon Prime members, Amazon already has a loyal customer base for virtually any category they enter. That’s 40 percent of the adult population in the U.S. Nothing is off limits for… Read more »
Bob Hilarides
Guest
2 months 15 days ago

While I too admire Amazon’s propensity to find new ways to leverage their assets and push the retail envelope, I share Nikki and Doug’s concern about relevance of the curation to specific shopper purchase occasions. I don’t often say, “I need a couple of highly-rated items, so I’m going to run out to the 4-Star store, honey.” They can certainly satisfy gifting occasions, and should do well over the next couple of months of holiday shopping. They will capture novelty/tourism shopping trips, but that won’t make 4-Star a scalable enterprise. And treasure hunt stores do better when they have a few common traffic drivers to get shoppers in the store. If management can find that thread of continuity across the assortment and give people reason to visit frequently, this could be a home run. If not, it’ll be another nice case study of Amazon testing the limits of its mission of “offering our customers the lowest possible prices, the best available selection and the utmost convenience.”

Scott Norris
Guest

Building on Matthew’s point, there are thousands and thousands of products on Amazon with a four-star rating. And “best selling” products are going to look a lot like what is on the shelf at Target and Walmart — the element of discovery isn’t a factor for the same underwear and USB sticks and Cheerios that everyone else buys. So what else is going to determine what gets selected for display in this “buy box”?

Call me a cynic but I see this as a play for manufacturers’ advertising funds and allowances; just another slotting fee to get into a featured space — whether online or in brick-and-mortar. If you can pay to play, you’ll get displayed and if you are a small manufacturer with well-rated products but not a big advertising budget, guess what?

Liz Adamson
BrainTrust

It will be interesting to see how cohesive the selection will be. There are dozens of product categories and sub-categories on Amazon.com, customers in the 4-star store could find it odd having a mix of toys merchandised alongside tools.

That said, it will definitely draw curious shoppers. And assuming the assortment is carefully curated and that it is updated as shopping habits change, it will even bring back repeat shoppers. In addition, this new store combined with Amazon’s bookstores, Amazon Go and its acquisition of Whole Foods is all a strong signal that 1.) Brick-and-mortar is not dead despite strong e-commerce growth and 2.) Amazon is experimenting with how to further disrupt the shopping industry.

Herb Sorensen
BrainTrust

This is a perfect formula for ANY brick-and-mortar store. Do you think that 100 years of bricks success will forestall anything but cosmetic responses, like “click and collect?” Note: “How Failure Spawns Success; (in retail, as well as elsewhere).” But most businesses fail so that OTHER businesses can succeed. Sad.

Chris Buecker
BrainTrust

I give 5 stars for this new initiative. Whereas a lot of retailers are struggling to find the best way to be successful in a new retail world, Amazon introduces another new truly innovative, customer-centric concept. “Chapeau,” like the French like to say.

Cynthia Holcomb
BrainTrust

It will be interesting to see how many Amazon 4-Star stores exist around the world in 2020. While Amazon bookstores are wonderfully chock full of 1000s of book titles, micro curations of category best sellers need to be consistently fresh, worth a trip to a physical store. Amazon 4 Star stores could be a category killer for small mom and pop stores selling toys, gifts, stationery, books … the list of categories is long. The 4 Star rollout strategy seems to more closely align with AmazonGo. Which is really quite brilliant!

Ananda Chakravarty
BrainTrust

Also to reinforce Matthew’s point — a quick search on Amazon for 4-star books gave me a count of over 90,000. That’s a lot of titles, so there will be some curation going on and for most bookstores, that’s a key. In this case, it’s just crowdsourced. The disruption factor here is limited, as good independent bookstores can curate and personalize. Amazon is adding its PR expertise with the 4-star, selling a few other pieces of merchandise (toys, games), pushing its tablets and Echos, and offering Prime membership trials.

Many customers, many categories. Optimizing to the mean will not give Amazon an edge over indies, even with some localization in the mix. Selling best-sellers for the local community can be exciting, but this is just pushing their test in brick and mortar further and even with data, they aren’t bringing the “personalized” experience that indie bookstores bring.

Peter Charness
BrainTrust

Stocking product that customers think highly of … why that sounds like … Retail. I agree with all the comments that suggest some further curation is needed. The store needs to answer the question around when I think of buying (product) x, I think of 4-star.

Jeff Miller
BrainTrust

Two things stand out for me on this. First, I like how they frame this store being localized in some way with popular products tied to the geography. Nike is testing something similar in Los Angeles and I think local and personal are the keys to quality brick and mortar retail for the next decade. Second, it’s another great way to incentivize people to sign up for Amazon Prime, which I think is their number one goal even ahead of retail sales.

In terms of how it impacts rivals, it will be interesting to see the product mix over time. Are they selling TVs that compete with Best Buy and Costco, computers to compete with Apple stores, toilet paper to compete with Target and Walmart, pet food, snacks, books, apparel, OTC medicine? I expect there will be a big push for Amazon private label products.

Ray Riley
BrainTrust

Brick and mortar data is vital, and Amazon’s distribution machine will most likely be able to optimally stock this store with relevant, top-rated product with dynamic pricing 24/7. Plus, I imagine it serves as another return checkpoint for Amazon customers looking to exchange.

Mike Osorio
BrainTrust

We all seem to agree — brilliant. From effective data capture to leveraging the power and success of real consumer recommendations, 4-Star will likely prove quite successful as they learn the best way to curate the assortment to create an understandable category mix and focus.

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Braintrust
"This is brilliant. Products curated by consumer input and some hefty data analytics."
"Bravo! Let’s call this a store “By the people, for the people” on a local basis."
"This is a perfect formula for ANY brick-and-mortar store. Do you think that 100 years of bricks success will forestall anything but cosmetic responses, like click and collect?"

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