Amazon (NASDAQ:AMZN) just announced yet another new brick-and-mortar store venture. Not content to sell groceries through Whole Foods and no line-up snacks and meals through Amazon Go, the company is opening a new physical store called Amazon 4-star. This one is aimed at urban, small format general merchandise stores from the likes of Target (NYSE:TGT).
Amazon 4-Star Opens Today in NYC
Yesterday, Amazon announced it would be opening an all-new physical store today, September 27. Located in New York’s trendy SoHo neighborhood, the new Amazon 4-star specializes in stocking items that have earned a rating of 4-stars or above on the amazon.com website. The company says it will also be offering new and trending products, and top-sellers. In addition, there will be themed collections such as “Trending Around NYC.”
AMZN says the product mix includes consumer electronics, books, games, toys, kitchen gadgets and home accessories. Naturally, there will be a heavy emphasis on Amazon’s own hardware — and you can expect much of what was revealed at this week’s surprise Alexa event will eventually make its way onto the Amazon 4-star shelves. Customers can try out Echo smart speakers, pick up Fire TV streamers or check out the latest Kindle e-readers.
Amazon 4-star will be open to the public, but each product will be identified with a digital price tag, which displays average ratings, list price, and the Prime price. The general public pays the list price. Prime members scoop up the savings just as if they’d bought the product online.
Naturally, AMZN says it will be happy to sign up customers on the spot for a free, 30-day Amazon Prime trial so they can take advantage of the discounted pricing.
A Target on TGT
The Amazon 4-star store isn’t large and the range of products on its shelves isn’t huge. But it does seem to have one retail competitor in mind. Target began opening a series of small-format stores last year, with plans to have 75 open by 2019. These locations start at just 12,000 square feet (an average Target store is 145,000 square feet) and tend to be located in densely populated urban areas, with merchandise that’s curated to the neighborhood. Target has set up shop in trendy NYC areas including Tribeca and Herald Square.
That sounds a lot like the Amazon 4-star store, from size to location to approach…
In addition to Target, the Amazon 4-star store could have implications for Best Buy (NYSE:BBY). The electronics retailer recently partnered with AMZN to sell Fire TV Smart TVs, but has also been selling and showcasing Echo smart speakers and Kindle tablets.
What’s Amazon’s Angle?
Amazon dominates online retailing, but its competition among traditional retailers is beginning to actively target online shoppers. In response, Amazon has been expanding its brick-and-mortar footprint with Amazon bookstores, Whole Foods and high-tech, cashierless Amazon Go stores. These physical stores also offer locations for AMZN to ship orders for customer pickup, which offers convenience while helping to lower its delivery costs. Whether Amazon 4-star is a one-off experiment, or a new format that will be expanded to additional locations isn’t clear at this point.
What is evident is that after starting as an online retailer that devastated traditional physical stores, brick-and-mortar expansion is becoming increasingly important to Amazon’s retail revenue — and AMZN stock.
As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.
