Amazon’s 4-star store shows what the future of multibrand retail could look like
Amazon’s new 4-star store, where customer feedback determines what’s on the shelves isn’t just a way for Amazon to appeal more to sellers — it’s also a look at how Amazon is shaping how the department store of the future looks like.
For one, it’s a new take on a traditional model where buyers decide on inventory, not customers, which means added pressure on big-box retailers to curate selections based on customer feedback rather than market research alone or raw assumptions.
It’s also a shot across the bow for the off-price retail model, which is based on selling goods for cheap because they didn’t sell well the first time.
“It’s the absolute best use of data we’ve seen so far,” said Jim Cusson, president of retail marketing agency Theory House. “Any retailer’s biggest concern is inventory carrying cost. If you can curate a store with guaranteed success of items on the shelves, you have a significant advantage.”
Amazon did not respond to requests for comment.
According to a recent report from consultancy IHL, retailers tie up significant amounts of capital anticipating customer purchase behavior by holding safety stock in the event some items beat expectations. IHL estimates that retailers in North America collectively tie up $24 billion in safety stock to compensate for poor inventory management. Items that don’t sell are often sent to discount retailers to offset some of the cost, but if retailers could more effectively predict how products will do at the outset based on customer data, discount retailers stand to lose.
“There’s a whole retail industry like TJ Maxx and Marshalls and other discount providers that make a living selling products major retail brands couldn’t sell or weren’t hot sellers,” said Cusson. “If Amazon can open its doors, and there’s a high likelihood the products will resonate with consumers, that’s a key advantage — they’ve got the most data.”
Cusson added that whether the challenge to off-price retailers becomes an actual threat depends on how quickly the concept of user-feedback driven merchandising scales, and how other industry players respond to Amazon’s move. In addition, as recent TJ Maxx growth plans demonstrate, some customers are drawn to a “treasure hunt” experience of finding a bargain after rifling through merchandise.
At Amazon’s 4-Star store, all products offered are rated at least four stars online, are “new and trending” or top sellers. Product categories include consumer electronics, kitchen, home, toys, books, and games; the store also features curated selections, including those most often added to online wish lists, products that are trending in New York, items that are frequently bought together, and “Amazon Exclusives.”
While 4-Star is an experiment in data-driven inventory, Amazon isn’t the only brand bringing customer data to inventory decisions. Stitch Fix, for example, has been using customer data to personalize product offerings to customers. EMarketer e-commerce and retail analyst Andrew Lipsman said Amazon’s 4-Star store will likely push traditional retailers to invest more in using customer data to inform merchandising decisions.
Customer data-driven merchandising also doesn’t push out retail buyers, though their roles may change, he added.
“There’s nothing that says they couldn’t do something similar — if you think about large retailers, they have their own data from online and physical stores, and they could incorporate product reviews and ratings,” he said.
Image via Amazon
Cheat Sheet: Shopify’s Shop Pay integration will share customer purchase data with Google
Allowing retailers to sell for free, and adding more payment options, makes Google itself more of a shopping tool.
LG kicks off series of live stream shopping events produced in-house
If a consumer sees something they like, they can click on the product and will be taken out to the LG website to complete their purchase.
Loyal and App-y: How QSRs are leaning into rewards programs to boost mobile orders and sales
Brands were forced to find ways to reach customers in their homes and fast-food restaurants, including McDonald’s and Burger King, found answers by investing in loyalty programs.
SponsoredHow retailers can be ready for holiday shoppers this year
Suchi Sastri, managing director and partner, Boston Consulting Group As the holiday season approaches and the pandemic continues to evolve, retailers want to know what to expect. Will e-commerce continue to grow at the rate it did last year? How big of a role will in-store shopping play in holiday shopping? While it’s still early, […]
Cheat sheet: Etsy beats earnings, turns focus to adding more revenue sources
Etsy is still growing beyond a blast of mask sales last year and now needs to manage 4.7 million sellers and 90 million buyers.
Member ExclusiveDespite hungry VCs, DTC brands are rethinking their fundraising approach
This is the latest installment of the DTC Briefing, a weekly Modern Retail column about the biggest challenges and trends facing the volatile direct-to-consumer startup world. Join Modern Retail+ to get access to the DTC briefing–as well as all articles, research and more. Before 2020, some founders and investors were starting to warn that most consumer […]