Features, Retail Insights

Amazon 4-star: Retail’s Data-Driven Future

Amazon just put another toe in the water of physical retailing. Its new retail concept, Amazon 4-star, opened in Manhattan’s SoHo last week playing to huge crowds. It dawned on me that this is a major model for the future of retailing. Contrary to Jeff Bezos’ mantra: try often, fail fast, this test will stick quickly and scale fast.

It’s a model that is data-driven powered by the quintessential superiority of Amazon’s analytics and machine learning. Note to retailers: The rest of the world will be forever racing to catch up to Amazon. I say, “good luck” because Amazon can keep racing faster, making bigger leaps forward. Every product in the store, which at first sight looks like an overwhelming hodge-podge of clutter, has an Amazon 4-star rating or better. That star metric tells you that these items are proven winners with customers. The store also features new and trending products that are popular in the NYC market. All products have a digital price tag with dynamic pricing, star ratings and the number of reviews it has received — plus the discounted Prime price.

But, get this. The “merchants,” or whatever Amazon may call them, do not just arbitrarily pick a bunch of its 4-star products to be presented in the store (games, kitchen appliances, electronics, toys and books and an assortment of Echo and Fire products). The merchants are AI and the products are selected by analytical popular demand, validated by interest and sales. Amazon curates its roughly 1800 products according to the star rating system, customer reviews and its human intuition. But the real merchandising is dictated by their data that measures everything that has sold within a market radius around the New York location, identifying precisely who bought what and when. This physical retail model is the aggregated curation of products that are trending in NYC as well as those on wish lists.

And let’s get even more personal (nobody comes close to Amazon). Superior data analytics track what is being purchased and who is purchasing it, real time. This enables Amazon to personalize texts and emails alerting customers to new products that Amazon will begin cycling through the store as the data identifies winners and losers in-store, adding in new 4-Star winners. This constant rotation of new, trending and wished-for merchandise compels repeat visits to check out what’s new.

This store is also a smart marketing tool for recruiting new Prime members to add to Amazon’s 100+ million subscribers. It’s anticipated that the large Prime savings will be compelling enough for many new customers to sign up for a membership. Non-Prime customers can sign up for a free 30-day trial, enabling the discounted Prime price at purchase. At check-out, store associates offer a quick-and-easy way to sign up and give the customer the Prime savings. With a new world digital commerce mindset, the store only takes credit cards or the customer’s Amazon Prime account number.

The Future

Listen up: This data-driven physical store model, “personalized” to the individual consumer, is the future of retailing. Doug Stephens, CEO and Founder of Retail Prophet, said, “As a shopping experience, Amazon is about as elegant and enjoyable as a chainsaw. But like a chainsaw, Amazon is purpose-built to do one thing and one thing only; to deliver the largest selection of products with the greatest level of speed and convenience… period. And if you know what you’re looking for, it’s a sharp tool that works brilliantly.” But be patient. This level of personal attention will soon forge a path of customization combined with experience that customers desire.

What Stephens misses in his description of the utilitarian Amazon experience is the power of Amazon’s data analytics to deliver what a customer actually wants. Granted, Amazon’s three advantages of convenience, value and speed may eventually be matched by competitors. But their enormous head start in superiority using data analytics and machine learning is arguably unbeatable. It will take a long time for the startups and the legacy retailers to catch up to the model. I believe Amazon is the always-surprising pioneer, forerunner, change agent – whatever you want to call it – and retailers will just have to keep running faster and faster to adapt Bezos’ innovations into their own futures.

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