Amazon Aims to Open Dozens of Grocery Stores
Seattle based e-commerce Amazon now plans to open dozens of grocery stores in U.S. cities, as per the Wall Street Journal’s report. It has cited unnamed sources, a move that would expand the retail and technology giant’s grocery footprint beyond its Whole Foods Market chain.
The first few stores will open in Los Angeles as early as the end of 2019, and Amazon is now in talks to open locations in shopping centers in San Francisco, Seattle, Chicago, Washington, D.C., and Philadelphia, as per people familiar with the matter cited in the Journal report. The company is also reportedly exploring the idea of purchasing regional grocery stores, the paper said.
The Seattle-based company, which has been experimenting with online delivery of groceries, has got into brick-and-mortar food retail with its 2017 purchase of organic grocer Whole Foods. Amazon has also expanded Amazon Go. And it is Amazon’s cashier less convenience store concept, to 10 stores.
As per sources, it is said that last year that the company planned to open as many as 3,000 of the so-far small-format stores, including up to 50 in 2019.
However, Amazon has declined the request for comment.
As the news broke in, shares of food retailers all fell on the news. It should be reported that Kroger, the nation’s biggest traditional grocery chain, closed down 4.5 percent Friday, while Walmart declined 1.1 percent. The shares of Target and Costco Wholesale also fell before recouping their losses. Amazon stock closed up nearly 2 percent.
Amazon’s $13.7 billion purchase of Whole Foods reported the company’s intent to break into the $840 billion grocery market but left it at a scale well below the likes of market leader Walmart, which operates 4,750 grocery stores.
As per some analysts, Whole Foods, which stocks a limited selection of items in contrast to Amazon’s preference for selling a wider range of items, as a starting point for Amazon in physical grocery retail. The firm has since started delivering groceries from the shelves of Whole Foods locations across the U.S.
As per Lisa Sedlar, former president and CEO of the Portland-based New Seasons Market chain and a Whole Foods purchasing director before that, Amazon is missing out on a significant portion of the grocery market with Whole Foods.
“Just purely natural and organic can be polarizing, and you miss trips. You don’t necessarily satisfy the eater,” said Sedlar, who is founder and CEO of Portland-based Green Zebra Grocery, a small-format retail concept with three stores in Portland and plans to expand to Seattle. “Coke and Diet Coke sell very well in my little store format, and we are mostly natural and organic,” she added.
Sedlar added that repositioning Whole Foods to carry more mainline products “would be a disaster” that could alienate the chain’s core customers.
She said with Amazon’s apparent move toward a second, more conventional grocery brand, big mainstream grocers “should be scared.” “The big stores have been doing the same thing for the last ten years basically,” she said, calling the in-store experience “kind of boring.”
According to her, food has not been the strength for Amazon thus far. But if Amazon will be able to replicate something like the bricks-and-mortar shopping experience of its physical bookstores in the new grocery brand, “they have a good chance of taking a lot of business away from the other big boxes,” Sedlar said.