Amazon.Com Inc (NASDAQ: AMZN) is building a national grocery chain amidst the pandemic as other businesses struggled for survival, Bloomberg reports.
What Happened: Amazon Fresh store, which marked its Los Angeles debut in September, inaugurated its eleventh store on Thursday and is working on at least 28 more, ranging from Philadelphia to the Sacramento suburbs. The company is also testing the “Just Walk Out” cashier-less shopping technology for its Go convenience stores at an Amazon Fresh location in Illinois which will be extended to the Fresh stores.
The company will be launching cashier-less stores in the U.K. to expand its automated checkout technology outside the U.S.
Amazon Fresh would enable the company to become stickier with devoted Prime members and tap Walmart Inc’s (NYSE: WMT) lower-income shoppers and wealthier customers preferring online orders.
Why It Matters: Last year, Amazon partnered with grocery distributor SpartanNash Co that included a right to stake acquisition in the company.
Amazon Fresh showcases polished concrete floors, digital price tags, and smart “Dash” shopping carts.
A basket of 30 commonly purchased grocery items in one of Amazon’s Chicago-area stores last month undercut Albertsons Companies Inc (NYSE: ACI)-owned mainline grocer Jewel-Osco, by up to 20% when including sale items, offering stiff competition to the likes of Aldi and Walmart.
Amazon Fresh stores strategy appears to be focused on disruption of the low-margin industry. Amazon’s acquisition of the Whole Foods Market in 2017 for $13.7 billion is yet to add synergistic gains.
Amazon Fresh included a dedicated staging area for order pickup and returns matching up with Walmart and Target Corp (NYSE: TGT).
The Fresh division is led by Jeff Helbling, a former technical advisor to CEO Jeff Bezos with Wei Gao, as online grocery supervisor, and Go Store developer Dilip Kumar.
Fresh stores typically range from 25,000 square feet to 45,000 square feet, exceeding the 13,000 square feet Go Grocery stores.
Amazon used detailed analyses of shopping habits to finalize the list of 15,000 products to fill the store shelves, restricted varieties of tomato soup, added private-label brands, including the Whole Foods 365 line and an extensive alcohol section beating the larger-format groceries.
Amazon Fresh’s ranks include veterans of German discounter Lidl, Starbucks Corp (NASDAQ: SBUX), Walmart, and packaged goods makers.
With at least 39 stores in the works, Fresh seems poised to surpass Kumar’s Go and 4-star stores.
The company’s quest for potential grocery store sites has commercial real estate brokers drooling.
However, Aldi plans to open 100 stores this year. Therefore, Amazon’s new chain will need to exceed at least Whole Foods’ roughly 500 locations to reflect a radical change.
Price action: AMZN stock was up 1.41% at $3,100.71 on the last check Thursday.
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