Why Amazon is Going Backwards to Move Forward

E-commerce is the future of shopping.

Though some disagree, the majority of industry experts, CEOs, companies, and mom-and-pop-shop owners would tell you the same.

In-person, or “offline” shopping is still responsible for over 90% of all shopping done - brick and mortar shopping isn’t vanishing away just yet.

Consumers simply aren’t comfortable buying certain products online yet - be it the need to check the quality of vegetables in person, try out that pair of Jeans, or smell that specific perfume before swiping a credit card.

And as expected, E-commerce behemoth Amazon.com is attempting to change the way that works.

But that’s not actually why Amazon is setup to open thousands of “Four Star Stores” across the World.

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Before I continue, I don’t want you confusing these stores with Amazon Go stores (the grocery stores with cool trending videos that don’t require checkouts and you can essentially you can just walk out of the store with your purchase).

Instead these Four Star Stores are like mini-targets - with a twist.

They consist of the sexiest, most popular, highly reviewed, most sought out for, and most purchased products from Amazon.com.

And this works for two reasons:

  1. At no point will there be a product that thousands and thousands of consumers aren’t interested in purchasing

  2. The products will always be cheaper at Four Star Stores than at competing stores nearby

Think about the number of times you’ve found something you’ve liked at a Brick and Mortar store - be it a phone case or a six pack or soylent or a textbook - and then proceeded to check the price on Amazon.com.

Okay, sure - so the products will be at Amazon prices, but isn’t it still expensive to own and run physical stores?

Typically, the answer is yes.

That’s the reason Walmart is investing so heavily into logistics, delivery systems, and online shopping, while also actively moving away from capital-intensive physical stores.

Jack Ma said it best - [to paraphrase] if Walmart wants to add 100,000 new customers, they need to build a 20,000 sq foot shopping center, with warehouses nearby, and a hundred employees. E-commerce companies need 1 server.

And that’s the beauty of online stores - your most expensive costs are distribution, and arguably storage. You pay no rent, your labor costs are minimal, and your overhead is cheaper.

Okay, so why in the world is Amazon moving backwards?

Here’s the secret - Amazon wants you to shop online.

You see, pricing at Amazon Four Star Stores will come in two tiers - a Prime price, and a non-prime price.

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So imagine this - you’re a non-prime user living in Manhattan.

You leave for home from work and you realize that you left your iPhone cable at the office.

You debate stopping at a Walgreens or a Target, but know that electronics are overpriced at these stores that sit along the walk home.

You spot the Amazon Four Star Store you’ve heard about from your friends, and decide to give it a look.

You walk in and see the really cheap gatorade packs, the cheap laptops, the cheap Alexa devices, the cheap socks.

So when you spot that Amazon basics iPhone cable that’s incredibly cheap, and clearly well-rated by fellow consumers - you’ll be faced with two choices:

  1. Buy the well-made cable at $12.99 without Amazon Prime

  2. Buy the well-made cable at $7.99 with Amazon Prime

And through this experience, you’ve likely been convinced to buy an Amazon Prime membership to attain the cheapest price for the product you were looking for, and for products you saw there and might buy in the future.

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The next step - once you have an Amazon Prime membership, why not log onto Amazon.com to see the full suite of benefits that come along with the membership you’re paying for.

You find that Amazon prime video has some cool shows, you find that Amazon pantry can ship you groceries, you find that Amazon Prime Now can get you a phone within the hour.

And now Amazon has added an online customer, just because he/she walked into a physical store.