- REUTERS/Rick Wilking
- Amazon is reportedly planning to launch a new grocery-store chain.
- The new chain is expected to be cheaper than Whole Foods and sell a wider assortment of goods.
- It could become a major threat to traditional grocery stores, including Walmart, Kroger, and Aldi.
Amazon’s purchase of Whole Foods in 2017 sent shock waves through the grocery industry and hammered the stocks of traditional grocery stores.
Eighteen months later, Whole Foods stores don’t look much different.
Prices were a little cheaper for a period of time, then rose again. The stores started offering some new services, including curbside pickup and delivery, but grocery stores such as Walmart and Kroger were already far ahead of Amazon in rolling out those options.
For a while, it seemed that initial speculation around Amazon’s impact on the grocery industry was overblown.
But that could all soon change.
Amazon is reportedly planning to launch a new grocery-store chain, and it sounds like it could become the game-changing threat that analysts expected when the e-commerce giant bought Whole Foods.
The new stores will be smaller and cheaper than Whole Foods, and carry a broader assortment of products than the organic grocery chain, according to a Wall Street Journal report, which cited people familiar with the matter. The stores will also focus on convenience and curbside pick-up, the report said.
This is bad news for traditional grocers, including Walmart, Kroger, and Aldi.
Grocery stores are low-margin businesses, and any added pricing pressure from a new Amazon chain could eat into profits.
“Amazon clearly has significant opportunity in the middle of the market, which a new concept could serve well,” the KeyBanc Capital Markets analyst Edward Yruma wrote in a note to clients on Friday. “This also gives Amazon the opportunity to use some subset of the technology employed in Amazon Go in a larger footprint box.”
But Amazon would still have a lot of catching up to do to steal market share from major grocery-store chains. Walmart has more than 4,000 stores in the US, and about half of them offer curbside grocery pickup. Kroger has more than 2,700 stores, and Aldi has more than 1,800 stores.
That said, Amazon has been known to move rapidly. In the span of just a few years, the company built a massive delivery network with the capacity to compete with carriers such as FedEx and UPS.
“Since Amazon’s acquisition of Whole Foods, grocery retailers have waited to see if Amazon would launch its own branded stores – and that day is finally arriving,” Sylvain Perrier, CEO and president of the grocery e-commerce platform Mercatus, said in an emailed statement. “Amazon grocery stores will certainly use their expansive shopper data to merge the in-store and online grocery experience and given that Amazon has a way of making certain strategies the industry standard, grocers will be in trouble if they do not heavily invest in their digital practices and find effective ways to complement the in-store and digital experiences.”