Asked to comment on a report in the Wall Street Journal that Amazon is in talks to open stores at shopping centers in major cities, and is mulling acquisitions of chains with around a dozen stores, Euromonitor International consultant Amanda Bourlier said it was not a huge surprise.
“Rather, it would be in line with the company’s growing investments in recent years in physical locations, including acquiring Whole Foods, launching Amazon Go convenience stores, and expanding package pick-up locations.
“Amazon grocery stores that don’t fall under the Whole Foods banner would likely reach a different consumer segment, broadening Amazon’s reach into the American grocery landscape. Amazon’s forays into online grocery sales so far have yielded mixed results, and traditional grocery retailers like Kroger have significantly stepped up their own investments in e-commerce.”
Whole Foods is a relatively narrow proposition, Go is small footprint and Fresh is delivery only
Whole Foods has attempted to address the 'whole paycheck' problem with the launch of 365 by Whole Foods stores, but rollout plans for the chain have recently been canceled, in part because "the price distinction between the two brands has become less relevant," according to CEO John Mackey.
That said, Q4 sales at Whole Foods stores were down year-on-year in the fourth quarter, partly due to lower prices, but in part because the chain still faces big challenges, despite its new ownership, according to analysts.
The best of Amazon technology and shopper insight under a new banner?
Amazon - which operates 10 small cashier-less Amazon Go stores and some bookstores as well as Whole Foods stores – is likely looking to test out a proposition that “leverages the best of Amazon technology and shopper insight” but reaches a wider audience than Whole Foods stores, predicted Danny Silverman, CMO at e-commerce data insights firm Edge by Ascential.
“Whole Foods is a relatively narrow proposition, Go is small footprint and Fresh is delivery only. A more traditional grocery play would cover critical gaps in their current model.”
An omni-channel approach
Chris Perry, VP at Edge, added that he expected the new stores - which are reported to be larger than convenience stores but smaller than the average supermarket - to have a strong emphasis on private label: “I would speculate heavy private label play here (ex. Aldi 2.0)."
Currently, for example, Amazon Go stores feature Amazon private label (such as meal kits) and Whole Foods 365 items, as well as a mix of national and regional brands.
So will the new stores be cashier-free? Amazon is not commenting, so we can only speculate, said Perry, who predicted that, “While it may not have Go just walk out technology on Day 1 for a larger store footprint, it may likely have the Amazon Books easy mobile app payment capability.
“This would also help them drive penetration and frequency of their amazon payment options and credit/store cards.”
He added: “I would also expect them to find ways to leverage the shopper behavior and purchases to re-market and drive certain category purchases online post initial in-store."