Seattle is the epicenter of Amazon (or maybe the reverse is true). The Spheres, a curated Tom Douglass marketplace, the Amazon Go walk-in store, and now the newly-launched Amazon 4-Star store, which I recently had the opportunity to visit. Here are my thoughts along with three things to consider if you’re a retailer or retail-based brand. 

 

Amazon 4-Star and why it's disruptive

  

Amazon 4-Star is a major departure from traditional retail practices in two major areas: crowd-sourced, versus buyer-driven assortment, and ratings-based context from which items are chosen. Let's dig deeper here. 

 

Crowd-sourced assortment

 

In traditional retail, you have a buyer (gatekeeper) of the assortment they’re selling. This buyer has the analytics of her business and what’s selling, and an eye for what's good or trending in the marketplace. The ratio is probably 80/20 analytics to experience or intuitive-based assortment decision-making. She may have been to the relevant trade shows and politely listened to the vendor presentations, but she probably doesn't have any a lot of customer data. 
 

Amazon has flipped the script by pivoting the whole thing on "which items do customers love." I can't over-emphasize how different this is from traditional retail.

It's important to note that sales are a lagging indicator of customer preference, and dependent on many variables including price, packaging, promotion, merchandising display and outside promotion (basically all the "P's"). People buy things only once because they didn’t like the product, or they continually buy a product they are mildly disappointed with because they don’t have a better alternative.

 

A customer rating, however, is the result of a customer's expectation and value perception of a product they have purchased and used. An example: a traditional retailer, say Walgreens, might offer the Lifestraw water filtration device, and a few people would buy it. Walgreens would never know if the customers loved it because they are only going to buy it maybe once a year at best. And it's sitting next to a bunch of other items that may have similar velocity. How to choose which ones to keep and build around?

The Amazon 4-Star buyer, however, put the same product into their assortment based on its 4.6 rating amongst 8,374 customer reviews (!) and then merchandised it with one of the customer reviews. It's a totally different model. The Amazon 4-Star buyer has a huge advantage because they already know the product is good. They go a step further and pass the information along to their customers in a quantifiable and meaningful way.

 

The Context of Ratings

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The other big disruption is context. Most retailers pick a category-based area of context, for example, groceries, electronics, housewares, etc, and build their assortment around that context. You might see stores orient around a seasonal context, such as a Christmas or Halloween store, or combine a category with a location-based context such as a fly fishing shop near great fishing water or a sandwich shop next to a school.

 

But rarely do you see an entirely different context like Amazon 4-Star has created. It felt like a totally different experience. Not only was I moving from books to headphones to toys to kitchen appliances (which is unexpected if you aren't in a big-box store), but I could lower my guard on quality, much in the same way I lower my guard on preservatives or GMOs when I walk into a Whole Foods. The high ratings context/experience also felt like a slam-dunk for gift shopping.

 

Overall, the merchandising was a bit clunky, and it felt like an over-crowded airport store at times, but if they can smooth out the experience I think you have another reason to buy Amazon stock. Or keep reading...

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Three Things to Consider if you are not Amazon

 

If you’re a retailer, or you manage a brand that relies on strong retail performance, here are three things to consider as Amazon continues to push the envelope: 

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1. Integrate your customer into the conversation

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Do you have the means to find out if your customers like what they’re buying? Consider a receipt-based customer survey, asking what they loved/didn’t like about their purchase. Offer an incentive like a gift card. People want to give feedback-- especially if you catch them at the right time. You can also create a customer panel, consisting of an opt-in online community that you can regularly contact for feedback. Or go old-school and bring them in, buy them a coffee and talk with them. Finally, if you’re not doing this already, go to Amazon.com and see what purchasers are saying about the product you are considering.

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2. Think about context-based merchandising

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People begin to “un-see” things that are continually presented in the exact same way. It’s called selective filtering and it’s how we process and sort what’s important and what’s not. This is especially true for center-store aisle presentations. Find ways to visually disrupt. For example, pull the canning and fermenting products out of their traditional spot in the aisle and put them next to the seasonal produce with a how-to book. You’ve just created an on-trend, lifestyle-based merchandising display. More importantly, you’re appealing to two new customer selection filters: “I’m looking for a gift” or “I’m interested in fermenting/canning.” And most of your customers didn’t even know you sold these items. A win-win!

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3. Train your store teams to ask for and pass along feedback

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Leveraging a strength that Amazon does not have, turn your team staff into a force multiplier by training them to ask for feedback on the products they’re buying. Then have the store team pass along the feedback to the buying office. You can emulate the Amazon 4-Star rating experience and surprise your customers by seeding quick cashier interactions like “This looks interesting, do you buy it often?” or “Lots of customers are buying this item, I think you’re going to like it.” Retailers like Trader Joes and Zara are famous for these strategies. Always remember that your store team is on the front line, and closest to the customer. It’s an asset you should leverage. 

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Have you been inside an Amazon 4-Star store yet? What do you think? Want to brainstorm ways to Amazon-ize your retail brand or product line? Drop us a line!