Notes From the Field – The New Amazon Store

by | Sep 28, 2018

Today, Amazon opened a new brick & mortar retail store in New York City. This generated quite a bit of press.

In and of itself, one additional Amazon store isn’t that interesting. After all, they have opened a handful of test stores already. However, with their purchase of Whole Foods in August 2017 and news reports that they want to open 3,000 c-store concepts by 2021, I had to see what it was all about and what it means to retailers for the future.

Overall the store embodies the concept of omnichannel. It is designed to provide a physical correspondent to Amazon’s virtual eCommerce experience. The products in the store are pulled from Amazon’s website based on their popularity and, I assume, how well they fit into brick & mortar store. The store is organized a little like a website, with items based on categories such as Electronics, Home & Kitchen, Baby & Children, and Books. There’s a lot of emphasis on Amazon products such as Alexa and Kindle. There’s a separate section for iRobot, probably due to a marketing partnership. Almost all of the products have displays indicating their popularity on Amazon, including ranking and reviews. The intent of the store is to have only products that are four stars or better on the Amazon product ranking scale.

The pricing is tied to Amazon’s website. The intention seems to be that products are available at the same price whether purchased online or in-store. The in-store pricing showed what discounts are available to Amazon Prime users. Digital shelf labels (made by Solu M) are used throughout.

Overall, I was interested to see how much technology was being deployed for retail automation. After all, Amazon’s business model is structured around using technology as a disrupter to lower costs. Relative to this, I didn’t see clear evidence of any technology that was particularly unique.

While there was evidence of an RFID implementation, I didn’t see any RFID tags on any products.

There were cameras throughout the store, but not enough, I believe, to enable the type of cashier less checkout available in the Amazon Go concept.

There is a standard checkout area, which is in the center of the store rather than in the front. The point-of-sale technology used is an Android tablet with an additional display for QR codes. This is designed to support the Amazon Shopping Mobile app. This app allows customers to pay using their Amazon account, to identify themselves to Amazon, earn their Prime benefits, and provide an integrated omnichannel experience. You don’t need the Amazon app to complete a transaction and the store can accept a standalone payment card. Cash is not available as a tender option. Currently, check-out transactions are a guided process by an Amazon sales associate, but it seems like self-checkout is likely going to become the primary way to complete a transaction. My purchase appeared on my Amazon order history under the “Amazon Stores” category.

So where does this leave us? My conclusion on the Amazon 4-Star Store is that it is likely an experiment for Amazon at this point. I can’t imagine a scenario where the location in SoHo New York is anything more than marginally break even. The property lease costs tend to be fairly high and the products being sold aren’t necessarily high margin luxury goods typical of the neighboring boutiques. The space itself isn’t very big, perhaps 12,000 square feet and I can see how maintaining inventory and managing replenishment will be a challenge. There is also none of the personalization of the shopping experience that Amazon has been able to do within its online offering. But, by linking shopping to its app I can see how they will be able to start. They certainly have the ability to direct customers to the store for specials or, if they are able to get customers to use the app during the product selection process, they will be able to drive additional in-store purchases.

My interest in this field trip is how technology is transforming retail and during its 24 years of existence, Amazon has led the charge. With what’s a significant investment in brick & mortar, their store concepts bear close scrutiny. At first glance, I don’t see this as a “store of the future” but rather a fairly practical application of the fusion of online and offline into the physical store. I will be interested to see how it continues to evolve.