Amazon has not been very quick to roll out interesting new formats of brick-and-mortar stores either with AmazonGo tech or to complement its Whole Foods acquisition. But that could all change slowly next year.
According to CNet and others, it was announced in early November, 2019 that this could all change. Can Amazon become a bigger name in the food and grocery space? With incredible investments in logistics I think it can even in such a hyper-competitive space. However it won’t be among Amazon’s easier battles.
Amazon will be opening a new, full-size grocery store in a neighbourhood of Los Angeles, and it won’t be under the Whole Foods brand. For retail food industry analysts that’s really interesting to watch. Could it one day impact the likes of Kroger, Target and Walmart? Amazon moves so slowly we’ve been waiting for them to scale into grocery stores for what feels like years now.
CNBC reminds us that this represents the first location of what is expected to be a new chain of grocery stores launched by Amazon.The store will be different from Amazon’s Whole Foods brand and will have a conventional checkout, unlike Amazon Go cashierless stores.
Whole Foods was expensive and it remains to be seen if that investment will have significant ROI, but taking on Walmart makes sense in the long term. Amazon has already beat Google in terms of product search with around 55% of all retail product searches now in the U.S.
Amazon on November 11th, didn’t say it will open more of these locations, what its selection or pricing will be, or what the brand name is. This means Amazon will likely scale AmazonGo before it scales these other types of stores. AmazonGo is an R&D triumph, and is like a cashier less grab and go micro stores for urban locations.
This appears to be a large format AmazonGo type scale where LiDAR and facial recognition upgrades the shopping experience of legacy grocery retail stores. However with Amazon experimenting with any number of hybrid brick-and-mortar store formats, it remains to be seen what 2020 has in store for us (no pun intended).
Will Amazon ever Disrupt Kroger or Walmart in Food?
One of the reasons this story got some attention was because in the jobs postings, the company described the Woodland Hills location as “Amazon’s first grocery store,” suggesting that it will have the Amazon brand name and that the company could expand to multiple sites. This could be AmazonPlus.
When Amazon shelled out $13.4 billion for Whole Foods, it was the start of a bigger master-plan. Amazon’s fanfare around HQ2 was quite a spectacle and its foray into Northern Virgina, Nashville and maybe New York is an interesting thing to watch. It’s a bit unbelievable that Azure won the pentagon contract over AWS, given the superior features of AWS that is a more mature product.
Whole Foods has not become augmented with AmazonGo like tech, so it’s a bit weird that Amazon would spin-off a new brand or chain of stores. Amazon drives a certain fear of disruption among legacy retailers and even fairly smart ones like BestBuy.
For the new grocery store format however it appears L.A., Chicago and Philly have the lead in being the first places to see the new kind of grocery store. It would make sense if AmazonGo mini-stores scaled at the same time to increase brand awareness for Amazon as being a serious entry into the convenience food space.
The stores are expected to be about 35,000 square feet, which is still significantly smaller than the traditional grocery store but big enough to maybe mean AmazonGo tech is actually more modular than once thought. To my knowledge, only about a dozen AmazonGo stores actually exist today, even after so many hears of hype and pilots.
The Wall Street Journal in March wrote about the existence of Amazon’s new grocery store format. I think they will start without AmazonGo like tech, but that could come in the future.
Amazon is Playing Catch-Up with Walmart, Alibaba, Target, Kroger, Costco
While the likes of E-commerce native brands Alibaba and JD.com are doing awesome in this food and grocery space in China, Amazon has been more timid. Just trying to take on Walmart at its own thing is a bit intimidating. It’s a problem of scale, slim margins and superior customer experiences. Stores are very different.
Amazon’s growing ambition in the roughly $800 billion US grocery market, where rival Walmart is the leader and Amazon, even after its Whole Foods deal, remains a small player. Even Costco and Kroger do what they do really well.
There are just around 500 Whole Food Stories, with about 10 times as many Walmart locations. AmazonGo stores also won’t employ as many real people as its technology enables a cashier-less like experience that will be faster for shoppers.
I agree with retail analysts who say that Amazon would need more than 2,000 stores “to be a major grocery player,” which is significantly fewer than Walmart or Kroger have, but more than Publix. If Amazon is the “everything store”, it needs to win more market share in food and grocery.
We’ll be watching what Amazon does in 2020. But it needs to start to move a little faster if it wants to be a serious player in the grocery space.