Photo: RetailWire
Amazon confirms it will open a grocery store not named Whole Foods
When The Wall Street Journal reported in March that Amazon.com planned to open dozens of grocery stores in cities around the U.S., including Chicago, Philadelphia, San Francisco, Seattle and Washington, D.C., the e-tail giant remained mum on the subject. That has changed, however, with a new report confirmed by Amazon that it will open a grocery store in the Woodland Hills neighborhood of Los Angeles next year.
CNET, the first to break the news, discovered four job postings for the location that billed it as “Amazon’s first grocery store.” The posting suggests that the store will operate under a banner other than Whole Foods. The store, Amazon confirmed, will not make use of the self-checkout technology used in its Go convenience store locations.
Amazon, as its recent announcement of free two-hour home delivery for Prime members shopping at Whole Foods exemplifies, is intent on gaining a greater share of the U.S. grocery market. Doing so will help drive its top line performance as consumers tend to shop more frequently and locally for groceries.
While speculation has centered around Amazon offering more of a mainstream supermarket to compete with the likes of Kroger, Safeway and other chains, management has not confirmed what type of grocery store it intends to operate. CNET reports that the new store will be located in a 35,000-square-foot space that was previously home to Toys “R” Us.
“When it comes to grocery shopping, we know customers love choice, and this new store offers another grocery option that’s distinct from Whole Foods Market, which continues to grow and remain the leader in quality natural and organic food,” an Amazon spokesperson told CNET.
- Amazon will launch new grocery store as alternative to Whole Foods – CNET
- Amazon pushes further into grocery business with new Los Angeles store – The Washington Post
- Amazon says it’ll roll out a new grocery store format next year – Engadget
- Amazon will be opening a new grocery store, and it’s not Whole Foods – USA Today
- Amazon to Launch New Grocery-Store Business – The Wall Street Journal
- Will free deliveries for Prime members make Amazon the driving force in online grocery? – RetailWire
- What will Amazon do with a conventional grocery banner? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: If you were in charge of the decision at Amazon, what type of grocery store would you open? Has Amazon learned what needs since acquiring Whole Foods to launch and scale a grocery chain with a completely different marketing model?
Poll
BrainTrust
Georganne Bender
Principal, KIZER & BENDER Speaking
Liz Adamson
VP of Advertising | Buy Box Experts
Grocery is a tough and highly competitive business and building out new a grocery chain from scratch is a very tall order even for the mighty Amazon. Given Whole Foods’ relatively small size and niche in the massive grocery market it’s understandable that Amazon is looking to expand, but I’m not sure why Amazon wouldn’t acquire an existing grocery player instead of building from scratch – it’s curious.
Of course Amazon is opening grocery stores. The selection at Whole Foods is too limited for some consumers (like me) and the grocery market is too lucrative for Amazon to pass up. Hey, if you’re going to compete with Walmart, compete with Walmart.
It’s said to be a low cost grocery format so I am not surprised that Amazon won’t be using Amazon Go checkout technology. As a store planner, I am looking forward to seeing what Amazon comes up with for store design.
This move shows that Amazon has not yet cracked grocery, despite its acquisitions and experiments in the sector. It also shows that Amazon remains serious about playing more strongly in the grocery segment. The challenge is, what can Amazon bring to the grocery space that doesn’t already exist? Such differentiation is important if Amazon is to take share from other players – which is the only real way of generating superior growth. The use of technology to drive efficiency and personalization is part of the play, but it’s not proven to be all that compelling so far. Being better in terms of products, format and service are really the keys to success – and given the relatively mediocre state of most U.S. grocers, there is an opportunity here if Amazon can seize it.
The bottom line of all of this and something that will help Amazon make the necessary investments is that this isn’t just about creating a successful stand-alone grocery operation. This is about moving more squarely into physical retail to support multichannel, gathering more data on customers, and bolstering Amazon’s ecosystem by playing a bigger role in the lives of consumers.
I’m not sure how much Amazon has learned from Whole Foods other than how to run out of things and not bring some of my favorite items back. BUT having said that, if Amazon sticks to its fundamental mantras about the essentials; speed, price, selection, efficiency and, most of all, great customer service, they should win big. Some day.
Because it turns out grocery is NOT that easy, which I’m sure they have found out from Whole Foods. This is not going to be an overnight thing like the rest of their explosive growth. Let’s see how much of Walmart’s pie they can grab in the next five years (PS: Whole Foods is NOT grabbing part of Walmart’s pie, as most of you know.)
I see Amazon grocery stores as simply Amazon’s next step on their way to building out their ability to deliver groceries same-day. They are already leveraging Whole Foods and using them as distribution centers for two-hour delivery in select marketplaces. This isn’t going to be just another traditional grocery store. Amazon will use it to go above and beyond the competition.
This will definitely be interesting — it will be difficult to be a complete shop with 35,000 square feet of space. Will Amazon focus on selling their private label lines they have been building for a while? Who knows? As mentioned above, it is extremely difficult to carve out new business from an already crowded field – look at Tesco and Lidl for examples. While I thought Whole Foods was purchased to be the lab, the assortment is not for all and there are not enough stores accessible to the general public unless you live in a large city.
Call it Amazon something. Make it a mainstream supermarket on a grand scale but add Amazon-ness — lockers, digital enhancements, a cafe, a learning center, emphasize the link to Alexa where groceries can be pre-ordered, etc. Go big but do it the Amazon way.
I do not doubt Amazon’s desire to keep moving forward, and they will move. But I think that it will be something to see them add on new strategies just for this move, because that’s what Amazon does so well.
I’d open a hybrid store: half store, half fulfillment center. Something set up for customers to shop inside, and where store associates can fulfill orders for delivery or pick up. The current typical grocery store is designed to support a customer wheeling a cart up and down the aisles, not for order pickers.
This is a no-brainer for Amazon, as they have clearly expressed their intent to grow and compete in the grocery space. The Whole Foods acquisition has started the process with the more luxury end of grocery stores, however there are far more general merchandise and home products available at lower levels of retail which are not featured in the stores.
It is also prime time for Amazon to reap the benefits of all the unoccupied big box stores such as the old Toys “R” Us, Sears and J.C. Penney locations. However, as we all can agree, the very tight margin grocery industry is extremely competitive, customers are brand loyal, and there are far more complexities to consider when starting a new chain from scratch, even for Amazon.
In my view, the brick-and-mortar version of Amazon should contain the same essential elements of the Amazon online presence. This includes shopper-centric features such as convenience, easy access to frequently purchased items and an overall store design with shopper efficiency in mind. The store should refrain from having a selling area larger than 35,000 square feet. In terms of selection, it should offer a very thoughtful inclusion of categories and items that are aimed at creating sufficient variety that attracts the shopper who wants some additional options beyond their shopping list, but does not want to engage in an arduous, time intensive “treasure hunt” in order to find fulfill their mission. Extended variety should be readily accessible via kiosk where items not stocked on the shelves can be ordered for same-day delivery or in some cases brought to the front of the store from an attached or nearby warehouse at a prescribed time for shopper pick up. Unlike Whole Foods, the in-store variety and pricing should be more amenable to a mainstream, middle income shopper. Finally, this store should offer an array of payment options, including a regular checkout line staffed with humans, self-checkout, and scan and pay as you go. Overtime, these options can be adjusted commensurate with shopper adaptation.
I’m with Mark … I don’t understand why they don’t acquire an existing grocery brand with all the bandwidth and experience behind it and “do their thing” with it. After all, they are creating an outlet to get more consumer data and further entrench themselves in our lives. Why start from ground zero? Regardless, this is Amazon. They’ll figure it out, and they can afford to lose time and money doing it. Such is the cunning model that they’ve created for themselves.
Amazon has learned from both its Whole Foods and Amazon Go operations. Now it sees mainstream grocery as the next logical step in its efforts to become the leading grocery retailer. Walmart and Target will certainly take notice. However more traditional supermarkets who thus far tended to dismiss Amazon, citing Whole Foods as a specialty retailer and Amazon Go as a convenience store, need to up their ante in light of this latest Amazon move.
Opening grocery stores to complete with traditional players is no surprise. The keys to success will be shopping efficiency and creative store design. The wild card will be private label.
Watching Amazon launch brick-and-mortar stores will be educational, not to mention entertaining. The company’s history of “fast fail” tactics and focusing on long-term goals ought to create a new perspective on food retail and what works. Other retailers can learn as Amazon learns if they pay attention. Lessons learned from Whole Foods will help, but this is mostly new territory for Bezos and company.
Perhaps the real question here is what is the main driver that has Amazon focused on building these new grocery stores in new locations. I believe that we need to focus on these as “warehouses” that can be grocery stores, rather than just grocery stores. If we look at these new grocery-enabled “warehouses” as part of Amazon’s grocery goals AND their next-day delivery goals, we suddenly have more locations with lower logistical costs for thousands of SKUs, in addition to grocery. This brings Amazon even closer to their overall corporate retail goals in addition to their grocery growth.
They say they are building a grocery store but, from a strategic standpoint, they probably see the locations as distribution or pick up locations that also allow customers to shop for themselves.
I imagine the layout will be designed for picking efficiency and ease of drive through pick up for groceries and other stuff bought on Amazon.com. Structurally, that might mean doing things like building the aisles and refrigerator/freezer coolers with space behind/between them, so pickers could source the product from behind the shelf, so they don’t get in the way of shoppers.
I would also suggest they focus on the power of the Amazon ecosystem and integrate the new stores into that with benefits for customers that use Amazon for both e-commerce and grocery. Promotionally, that might mean not only savings for Prime members when they shop at the grocery store, but also savings off of their annual Prime membership fees for regular grocery shoppers. The goal would be to make Amazon the easy choice for just about everything.
I concur with Mark. The easiest way for Amazon to enter the market would have been to buy a small chain and learn what the grocery business is for those not named Whole Foods. They will discover it is a very competitive industry. It will be interesting to see their approach to a physical plant, product selection and pricing, marketing and customer service.