Amazon Plans To Open Physical Grocery Stores

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Amazon is planning to open its own set of new grocery stores across the major U.S. cities at the end of the year; the Wall Street Journal reported, Friday. The article said that the information came from ‘people familiar with the matter,’ but did not mention who these people are.

According to the report, Amazon’s plan to launch physical grocery stores is its attempt to broaden its reach in the food business and touch more aspects of consumer’s lives.

The sources reveal that Amazon’s grocery store will have its first outlet in Los Angeles, that will be open possibly before the end of the year. Additionally, the world’s biggest e-commerce platform has signed leases for at least two other grocery store location with a possible opening early next year. However, details of where these locations will be are still unclear.

Furthermore, Amazon is also looking at opening its own grocery store line in San Francisco, Seattle, Chicago, Washington D.C., and Philadelphia, the sources revealed.

Wall Street Journal said that its sources claimed that the new grocery brand would be different from Whole Foods Market chain, which the company purchased two years ago. It is not meant to compete with upscale Whole Foods but instead offers a variety of products at a low price point, different from WFM’s selling proposition of offering products with no artificial flavors, colors, preservatives, and sweeteners.

These people who claim to know about the plan did not mention whether the grocery line will carry the ‘Amazon’ name.

WSJ wrote: “After two decades of upending the retail industry by shifting shoppers to the internet, Amazon in recent years has become increasingly focused on physical retail, posing a threat to traditional grocers. The new chain would help Amazon in fulfilling a yearslong initiative to build out a physical grocery presence, which was at one point potentially envisioned to reach more than 2,000 brick-and-mortar stores in a variety of sizes and formats.”

For the last few decades, Amazon has grown as a company from a website that sells books and music that it initially was. Now, the company is a leading cloud computing agent, a significant player in Hollywood entertainment, a stakeholder in the world’s logistics service, and just recently have explored the world of digital advertising, finance, and health care.

Amazon, who briefly took the crown as the world’s most valuable public company, is set to broaden its portfolio to serve lower-income consumers. Recently, the company offered discounted versions of Amazon Prime to customers who are eligible for Medicaid and other government assistance programs.

“Amazon has had mixed results with its food-delivery business, and it wants to understand better how it can cater to grocery shoppers, according to people briefed on the company’s strategy, ” Wall Street Journal wrote.

After The Wall Street Journal reported news of Amazon’s plans Friday, share prices of other supermarket operators tumbled, with Kroger losing 4.5% of its value and Walmart ending down 1.1%. Amazon shares rose 2% on the day.

Amazon’s new grocery brand comes as roll out of cashier less Amazon Go that has since been tested in different upscale markets around the United States.

It is still, however, unclear whether or not the new physical stores of Amazon will be cashierless. One thing that the sources said is that the company is tilted towards customer service and pick – up capabilities. It is also heavily rumored that Amazon will have attached parking lots to speed customers’ ability to get the groceries.

These people have said to WSJ that Amazon is targeting new developments and occupied stores with leases that are about to end.

They teased that the new physical grocery stores could be in strip centers as well as open-air shopping centers. It is also revealed that the stores will be in about 35,000 square feet, a little smaller than the typical 60,000-square-foot supermarket.

“Amazon doesn’t want restrictions on the type of goods it may sell at its stores and wants the ability to change the store and sell health and beauty products; for instance, the people familiar said. Leases in shopping centers often include limitations so that businesses complement rather than cannibalize each other,” they added.

Several analysts have suggested that the strategy of mixing e-commerce with physical stores is the direction the e-commerce industry is heading.

Customers want to be able to shop when it is most convenient for them, which could be in-store, online or a combination of the two,” said a spokeswoman from the International Council of Shopping. /apr

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