Amazon's announcement of its first physical store opening on Manhattan's 34th Street is not a surprise to me, as it was predicted in the book I co-authored with Michael Dart, The New Rules of Retail--first published in 2010. The logic was the same then as it is now. Amazon has a "big data" base, guessed to be larger than the Pentagon's, and they know how to use it. It provides them with razor-sharp knowledge such as what Jane Doe, who is married with two kids and a dog, living in the East Side of Manhattan (or anywhere), is eating for breakfast, what brand of jeans she wears, the charities she gives to, the music she likes, and so forth. Therefore, as Amazon rolls out its stores nationally, it can assort each location with precisely those items that are locally preferred. Yet, they will also have screens for downloading and selecting from Amazon's total inventory.
The personalized knowledge that Amazon continues to build on, and that all retailers are pursuing, is collected over time across all accessible consumer browsing and transactional points. It tracks consumer shopping behavior and can be drilled down to individual profiles. This is the "big deal" part of the buzz concept of "Big Data," because it tells the retailer not only what brands the Jane Does on the East Side prefer, it can also indicate what kind of shopping experience, environment and service they expect. Most retailers have not yet scratched the surface on big data analytics and its laser-like ability to localize, even personalize the shopping experience. It will be interesting to see how Amazon uses its supposed advantage in this area.
If Amazon demonstrates this pinpointing capability of merchandising the store with a localized assortment, as well as personalizing the shopping experience, they will have raised the competitive bar and sent a message to all retailers that understanding, analyzing and using big data to personally engage customers had better be moved to the top of their priority list.
Another motivation for Amazon's decision might very well have been the unprecedented success of Apple's stores. Of course, this also raises the question of how Amazon will create some kind of neurologically compelling experience within their stores. Another factor favoring Amazon's decision are the research findings that consumers who have the option of shopping both online and off are spending three to four times as much as those shopping just one channel.
So what might a neurologically compelling experience look like in an Amazon store? Given the range of products they sell, I would speculate they will select two or three product categories, probably those that consumers prefer to touch, feel, smell and try on. This would suggest apparel, accessories and beauty products. It also might include locally preferred books and electronics. The merchandise would be narrowly assorted, again based on neighborhood preferences. And, the physical layout might be "showroom-like" as opposed to more traditional stores. Of course there should be Internet screens throughout so that customers can download and view the full line of products if those on display are not to their liking. In fact, for apparel, they might even have virtual fashion mirrors through which customers can download items, using hand gestures, that they can view superimposed on their bodies for an idea of what the outfit will look like, and how it might fit.
In the beauty category they might copy Macy's interactive touch-screen beauty kiosk that educates the customer about which products would best fit their persona. Amazon could also borrow from Burberry's high-tech, higher touch in-store experience. One such example is the customer's ability to scan a displayed product's bar code with their smartphone, which then triggers a storytelling video of the designer describing the fabric used, where it was made and what inspired the design. And Burberry's audiovisual extravaganza of LED screens streaming videos and cool music throughout the store could add to the experience--to say nothing of providing food and refreshment stations.
Taken to an imaginative extreme, but highly possible for Amazon to pull off, given their big data capability, they could take a page out of Apple's playbook and have "yellow-shirted" genius assistants who engage customers on a personal level and educate them on the new "Amazon Way" of satisfying customers (I can't imagine what that might be, but I'm sure Jeff Bezos can figure it out. It is a great idea).
Another reason for Amazon's brick and mortar strategy is that they had to be all ears when their nemesis, Walmart, was quoted in the Wall Street Journal about a year ago saying that they were essentially redefining their 4500 retail stores as distribution centers. The big "Aha!" about that statement was that these locations are now a place from which to distribute goods as well as a place to shop. How smart is that?
A final point, and another of the "new rules" in our book, is that all retailers and brands must adopt the strategy of what we coined 'preemptive distribution.' Simply put, since the POS is the consumer, wherever they may be, and since they demand (because they can) that whatever it is they desire be in front of them either digitally or physically, whenever they want it, then retailers must operate on a matrix of all possible distribution platforms, all seamlessly integrated and interchangeable, for shopping, ordering, purchasing, paying, pickup, delivery and returns. The buzzword, of course, is omnichannel.
Finally, regarding Amazon's 34th Street location, in the (perhaps) distant future, Macy's might have invited Amazon to physically set up within their flagship store on Herald Square. Just as Topshop, Bonobos and Brooks Brothers set up in Nordstrom's store and Sun Glass Hut and many others in Macy's, it has been proven that there is a huge synergistic benefit to be gained by this strategy. For example, a Brooks Brothers-loyal customer learns they're located in a Nordstrom store across the street, as opposed to having to make a long trip across town. The consumer goes to Nordstrom for Brooks Brothers, and while there, notices something across the aisle they love. Thus a purchase is made of another Nordstrom product; likewise for a Nordstrom customer discovering Brooks Brothers and purchasing the brand while there.
This arrangement or collaboration or whatever you want to call it is the future. Retailers and brands do not decide where or how consumers will seek their products or services. The consumer will decide, and the retailer had better be there: wherever, whenever, how, and however they desire the retailer to be present... or else! Period!
Thus, Amazon is still breathing as it makes itself accessible "offline" on 34th Street in Manhattan, and likely soon to be rolled out across the country.
About Robin Lewis
Robin Lewis has over forty years of strategic operating and consulting experience in the retail and related consumer products industries. He has held executive positions at DuPont, VF Corporation, Women's Wear Daily (WWD), and Goldman Sachs, among others, and has consulted for dozens of retail, consumer products and other companies. He is co-author of the recently published second edition of The New Rules of Retail (Palgrave Macmillan, 2014). In addition to his role as CEO and Editorial Director of The Robin Report, he is a professor at the Graduate School of Professional Studies at The Fashion Institute of Technology.