Amazon: Coming to Your City?

By Ben Rapp

The Seattle-based e-commerce company Amazon has been making big steps in the brick and mortar space in recent years. In November 2015, Amazon opened their first physical store – an Amazon Bookstore – in Seattle and currently has more than 15 of these stores across the United States, including two in Manhattan. Amazon Bookstores sell books, devices, toys, games, and more. However, bookstores are nowhere near the end for Amazon.

Amazon continued expanding their physical retail locations, placing pop-ups in malls, Kohl’s and Whole Foods. The e-commerce behemoth has even filled these locations with consultants introducing potential customers to Alexa. Such physical spaces also sell Amazon devices and Alexa-enabled smart home products. Throughout the country, there are approximately 80 Amazon pop-up locations today.

In January 2017, Amazon opened its first cashierless grocery store to the public in Seattle: Amazon Go. Today, Amazon Go has three locations in Seattle and two in Chicago. Bloomberg reports that Amazon plans to open 3,000 Amazon Go stores in the United States by 2021.  In June 2017, Amazon’s 13.7 billion dollar acquisition of Whole Foods gave the company almost 500 new retail locations in which they began selling Alexa devices and offering discounts to their Amazon Prime subscribers. In September, Amazon made the latest addition to their growing list of retail stores, Amazon 4-star. Amazon 4-star is located at 72 Spring Street in New York’s SoHo neighborhood. On its website, Amazon has voiced plans to open a second 4-star store in Berkeley, California in the near future.

The SoHo Amazon 4-star store opened on Thursday, September 27 without much warning, appearing in the news only one day prior. The store prides itself in only selling products with a 4-star rating or higher in a large variety of categories including consumer electronics, kitchen, home, toys, books, and games. Compared to Amazon Bookstore, the books in Amazon Four Star have a similar offering in terms of categories but a smaller selection. Amazon selects a popular book and claims “if you like this, you’ll love [these few books].”The books at the Amazon 4-star store are displayed with the front facing the customer, rather than the spine, just like in Amazon Bookstore. The Amazon 4-star store also has a large selection of highly-rated products and is a great place to go and buy a gift for someone else, or even oneself. Contrary to expectations, the Amazon 4-star store still has cashiers. The cameras and sensors that replace human cashiers in Amazon Go stores cost $1 million per store. Given that the 4-star store is even larger than Amazon Go stores, equipment would cost even more. Although there are still cashiers, the checkout process is very simple. Amazon customers can use a QR code through the Amazon app to pay as it links up to different payment accounts under their Amazon profile, including gift card balances.

So where does Prime come into the picture? In the 4-star store, Amazon Prime members receive better pricing on many items. Outside of Prime membership, non-members are given the option to sign up for a 30-day free trial. Aside from directly pocketing products to people who are too impatient to wait for 2-day shipping, the 4-star store is also a great way for Amazon to promote their annual Amazon Prime membership, a service that currently has over 90 million subscribers in the United States.

It is very interesting to see Amazon, once solely focused on e-commerce, enter the retail store space. According to eMarketer, while Amazon dominates the e-commerce space, 90% of consumer spending still occurs in brick-and-mortar stores. Amazon has used their online presence to build brand recognition and customer loyalty and is now introducing its brand to physical spaces. Amazon’s entrance into the retail space is also forcing other stores to make changes such as the use of mobile technology in stores. Target, Walmart, Best Buy and many other popular brick-and-mortar stores have been introducing and updating their apps to improve the customer experience.

With all its expansions into the retail market, it will be interesting to see what the e-commerce giant does next. Amazon has spent years building its online business and has been blamed for pushing brick and mortar stores like Barnes & Noble out of business. Now, Amazon opening up its own brick and mortar stores, such as the Amazon Bookstore, to replace its competitors. What part of the retail industry will Amazon target next?