Amazon steps in to the food industry, again

Published on March 5, 2019

A new grocery giant is just around the corner, promising to conquer major grocery retailers like Kroger, Walmart, and Target, according to the Wall Street Journal.

The first store under Amazon’s own grocery label — separate from Whole Foods — is set to open by the end of the year. Amazon’s new chain will comprise offer up far more food items — and likely at lower prices — than its Whole Foods subsidiary. The first store is set to open in Los Angeles with follow ups in San Francisco, Seattle, Chicago, Philadelphia, and Washington, DC. Of course, the company warns its own growth plans are tentative: Though the leases for most of the cities are signed, it is not guaranteed each one will open.

Analysts aren’t yet convinced about Amazon’s prospects.

“Whole Foods’ prices have been trending down, so it didn’t make a lot of sense to keep the brands separate.” — Loop Capital Markets analyst Anthony Chukumba.

Amazon plans to embrace smaller locations at around 35,000 square feet — which is half of a regular size grocery store — in order to expand faster. Opening up the physical stores is the latest “flex” in the Amazon ecosystem “muscle.” It allows Amazon explore other sides of online retail, and possibly outflank long time rivals Walmart and Target — which continue to play “catch up” in online sales.

It’s  not Amazon’s first foray into the grocery business. Amazon purchased Whole Foods in 2017; at that time Amazon acquainted itself with the food industry. It expanded by thirty stores, and although the numer of items for sale has increased, special offers and discounts brought droves of loyal Amazon Prime members to its stores.  The CEO of the Whole Foods John Mackey — with whom Grit Daily executive editor met with right before the acquisition — admitted Amazon’s positive contribution to the chain.

After it absorbed Whole Foods, Amazon launched  Amazon Go— its “cash free” and “line free” concept store with decidedly mixed success. The store requires you to enter with the AmazonGo app. Buying requires consumers to just grab an item and put it in your bag and walk out.

An advanced camera system adds every item you pick up to your shopping cart in the app. The purchase hits your credit card linked to your AmazonGo account automatically when you exit the store. So far, AmazonGo has several locations in Seattle, San Francisco, and Chicago — with one coming to New York. It is unclear, however, whether the same concept will be implemented in the newly announced grocery chain.

Mari Paliienko is a Contributor at Grit Daily. Covering events and brands, she is based in New York.

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