Tuesday, September 29th, 2020 September29th2020

Sell for More News: Amazon’s 3 pronged push for grocery domination

Published on September 29th, 2020

Sell for More News is a weekly blog series with interesting information from the world of commercial real estate.

 

Amazon Go, Whole Foods and now a yet-to-be-named traditional grocery story concept.  These brick-and-mortar stores will compliment its Amazon Fresh online food delivery service.

That could mean a company known for its massive use of fulfillment centers to serve online orders could be looking for the retail property needed to create three national chains.

Amazon Go

The company said it’s close to opening its second cashierless Amazon Go store in Redmond, Washington…a suburb of its hometown where the first Go store started this year.  But that appears to be just the beginning.

Some of the new grocery stores are expected to be smaller format Amazon Go grocery locations, a concept that the company debuted this past February in Seattle’s Capitol Hill neighborhood.  Go allows customers with Amazon accounts to pick out their items and leave unencumbered by a check out line encounter.

Exactly how many Go stores are planned is still unclear. The company confirmed that in addition to Redmond, it plans at least one new Amazon Go store in the Washington D.C. region…which is also where Amazon’s second headquarters campus is under construction.

Traditional grocery concept

Amazon has also posted jobs for retail positions at outposts of its new traditional grocery store concept in Los Angeles, San Francisco, the Chicago suburbs and Washington, D.C.

Amazon’s new initiative comes during extreme uncertainty for retailing, which took a body blow as the coronavirus pandemic unfolded. The crisis pushed many already stressed retailers into insolvency, but it has proved to be a boon for both Amazon, which saw a huge spike in shopping by homebound consumers, and traditional grocers, which benefited from an early surge in anxiety-fueled stockpiling as they stayed open because of their status as essential services.

The move is in keeping with Amazon’s long-term strategy and its history. The company has dabbled in real world retail many times already, using many different models, but the end game is the same: To gain as much market share as possible. And historically, Amazon is not afraid to take a temporary hit on profits in its bid for long-term dominance.

In this case, the new stores will put Amazon up against traditional grocers in a direct, real-world contest, an eventuality that has been speculated on since its acquisition of the Whole Foods grocery chain in 2017.

As New York management consulting firm McKinsey & Co. said in a report issued in February, “The fight is on.”

The company is entering an industry with a few very big fish but that is still quite fragmented, though it has gone through steady and successive waves of consolidation since the 1990s.

As of 2016, sales by the 20 largest food retailers accounted for 66% of all grocery store sales in the United States. Two of the top four grocery retailers in 2016, Walmart and Kroger, took in almost half of all the sales.

An Amazon spokeswoman also confirmed that the company plans to open grocery stores in the Chicago suburbs of Oak Lawn, Schaumburg and Naperville and in Woodland Hills, Irvine, and North Hollywood in greater Los Angeles. These are expected to operate with conventional check-out systems and be run under a new brand, neither Whole Foods nor Amazon Go, that focuses on organic and natural foods.

 


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About Beau Beach, MBA CCIM

Beau is a tenacious Commercial Real Estate Broker, author and adoring father of four. His clients appreciate his no-nonsense demeanor and his legendary work ethic.

Beau leads Beachwood which is a commercial real estate broker for sellers in the Nashville, Milwaukee and South Florida markets.

He’s the author of the books The 3 Reasons: Why Most Commercial Properties Don’t Sell and True Wealth: What Every Seller Should Know About 1031 Exchanges.

Beau can be reached at 800-721-3287, click to schedule a call or Beau@BeachwoodSells.com