Amazon\’s announcement of its first physical store opening on Manhattan\’s 34th Street is not a surprise to me, as I predicted it four years ago in the first edition of my co-authored book, The New Rules of Retail, published in 2010.
The logic was the same then as it is now. Amazon has a huge database, estimated to be larger than the Pentagon\’s — and they know how to use it. The data provide them with laser-sharp knowledge, such as what Jane Doe — who is married with two kids and a dog and is living on the east side of Manhattan (or anywhere in particular) — 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 precisely with those items that are preferred by specific shoppers. The stores will also have screens for downloading information and selecting from Amazon\’s massive 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, and it’s game changing. It tracks consumer-shopping behavior and can be drilled down to individual profiles. This is the big deal part of the buzz concept, 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 traditional 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 analytical advantage in this area.
Another motivation for Amazon\’s decision to open shop in the shadow of the Empire State Building might very well have been the unprecedented success of Apple\’s stores. Of course this raises the question of how Amazon will create some kind of meaningful neurologically compelling experience within their stores. Another factor favoring Amazon\’s decision must be the research findings that reveal consumers who have the option of shopping both online and off are spending three to four times as much compared to those shopping just one channel.
Furthermore, Amazon had to be \”all ears\” when its nemesis, Walmart, was quoted in The Wall Street Journal about a year ago that they were essentially redefining their 4500 retail stores as distribution centers. The big aha about that statement was that their retail locations have become convenient places to distribute goods and are interchangeable as equally convenient places to shop. How smart is that?
A final point, identified as one of the new rules in our book, is that all retailers and brands must adopt the strategy of what we coined as “preemptive distribution.” Simply stated, 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, seamlessly integrated and interchangeable, for shopping, ordering, purchasing, paying, pick-up, delivery and returns. The buzzword, of course, is omnichannel.
Lastly, regarding Amazon\’s future 34th Street location, with the brilliance of hindsight, Macy\’s might have invited Amazon to physically set up within their store at Herald Square. Just as Topshop, Bonobos and Brooks Brothers set up in Nordstrom\’s store, and Sunglass Hut and many others have set up camp in Macy\’s, it has been proven that there is a huge synergy gained with this strategy. For example, a Brooks Bros. loyal customer learns they are in a Nordstrom store across the street vs. a long trip across town. The consumer shops Brooks Brothers at Nordstrom, and while there, makes an impulse purchase of a Nordstrom product. And the whole process can work in reverse with Nordstrom leading the purchase experience.
This collaboration is the future. Retailers and brands no longer control where or how consumers will seek their products or services. The consumer will decide, and you had better be there — wherever, whenever, and however they desire you to be there. Or you are dead, period!
Well, Amazon is still breathing, as it now makes itself accessible offline on 34th Street in Manhattan. And as I predicted, it will likely roll out across the country soon.