While a recent report that Amazon.com plans to open hundreds of stores may have been exaggerated, the possibility of such an expansion underscores Amazon’s secret weapon – its massive data warehouse. Here’s what shoppers can expect.
I have yet to find a customer review about Amazon.com’s data capabilities on one of its millions of web pages, but if it were to open as many stores as has been recently reported, those insights would certainly be stocking its shelves.
The world’s largest online retailer was rumored to have plans to build as many as 400 locations, if the CEO of mall operator General Growth Properties, Inc. was to be believed. The executive soon after backpedaled on his comment, but whether the recent statement is true, such a strategy should not catch us by surprise. Amazon has already dabbled in physical retail and has one of the best data sets in the industry to inform a store expansion plan.
Yet Amazon’s approach to brick-and-mortar – it opened its first full-service store in Seattle in 2015 – is rather conservative, particularly when compared with much smaller and younger online merchants. Warby Parker, Birchbox and Rent the Runway have all opened shops within the past year.
Unlike these retailers, Amazon has focused on building and leveraging its data warehouse over many years, so it alone is probably worth more than the actual merchandise of its rivals’ warehouses. With an active user base of roughly 250 million worldwide, and hundreds of millions of products to sell, its massive reservoir of online purchase data could establish the foundation for hundreds of stores.
So why is Amazon so slow to more aggressively break ground? After all, one factor that makes the digital-to-physical model so compelling is that no matter what we sell consumers, a large majority remain steadfast in their desire to shop in brick-and-mortar locations. In fact, 85% of consumers say they prefer to shop in physical stores.
One answer may be that Amazon, with an estimated $107 billion in 2015 sales, does not necessarily need a major physical presence.
However, a few hundred stores might come in handy. They could, for example, support Amazon’s digital business by acting as small warehouses for home delivery in urban areas, while also providing a new layer of consumer behavior data. Again, Amazon is already testing some physical formats; they just aren’t all full-service stores.
The retailer opened its first brick-and-mortar location in Seattle in the fall of 2015, following the opening of an experimental order pickup and drop-off location near Purdue University. The university store, called Amazon@Purdue, likely served as a test of the brick-and-mortar waters. Amazon has since opened several other near-college pickup stores, including in Cincinnati, Berkeley, Calif., and Amherst, Mass.
Some may believe that by opening physical stores, Amazon might cannibalize its online outlet. I hardly see how that is possible. No single store would be able to offer the vast selection of its website. It’s a store, not Dr. Who’s TARDIS.
That said, however, what retailer if not Amazon is better suited to make the store assortment fit each independent market? The data pool it can tap into to make in-store product decisions and to shape the customer experience has to be about as good as it could get.
Amazon understands what customers in specific geographic trade areas have been ordering for years, across millions of titles and products. Rather than stock the store with 5,000 individual items and then do the interpretive dance of what works and what doesn’t, it has the wealth of product diversity to shape its merchandising decisions.
In a way, it is like personalization on the basis of neighborhoods. That is the future of retail, and just as Amazon ushered in a new retail reality by building the first truly megalithic online store decades ago, perhaps it will use the information it has since gathered to reverse-engineer what the physical store experience should and could be.
Call me crazy, but while many retailers are trying to figure out how to shape this kind of retail variability at scale, Amazon could be the first to really pull it off physically and economically.
Amazon In Store: What To Look For
Personally, as a consumer, I am curious to see what the physical Amazon experience would be. Should Amazon open a store near you, this is what shoppers should expect:
A “me”-tail store: Reliable customer insights should lead to tailored product assortments. All that data should be on display in the form of a product assortment that is relevant while also anticipating needs. The shopper, upon entering, should think, “Hey, Amazon gets me.”
Humanized experience: since Amazon knows what customers have purchased online, it can use that history to customize its ongoing suggestions online and also to direct the shopper to items that may interest her in the store. Opt-in mobile apps would be an incredible tool here – it can then make nuanced adjustments as needed, balancing the store to meet personal experience.
One-to-one offers: amazon can extend special offers that blend online and in-store activities. It can, for example, alert a shopper to soon-to-arrive products that may appeal to her based on previous activities, so she can per-order it for store pick-up and write a review.
Lastly, the shoppers could offer Amazon their feedback, gigabytes of it, so that it can further personalize the experience. Amazon’s data centers may be massive, but few things matter as much in the physical environment as the human touch.
The options are endless – and exciting.
This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here.