Amazon is a growth and expansion juggernaut and expanding beyond Whole Foods was probably an inevitable move. What I find mildly surprising is the speed at which Amazon is planning to expand given the still relatively recent acquisition on Whole Foods. Moving into a new segment of the food market will not be bad news for Whole Foods, since it sounds as though the new grocery concept would be targeted to shoppers who are not already Whole Foods customers.

Amazon does not seem overly concerned with profit margins, which is a great attitude to have if you’re getting into the grocery store business. They bet a lot that Prime memberships will drive their business – at some point, they must think that will stop or slow down enough to make operations that only exist to support Prime members unaffordable.

Does it surprise you that Amazon is expanding its retail brick-and-mortar footprint? Be it grocery or other retail areas, you will see Amazon expanding. The goal is not only more grocery sales. It’s also more Prime members using Amazon for their everyday needs.

The decision to launch a new grocery banner underscores Amazon’s ambitions in the grocery sector. It is also a tacit admission that Amazon cannot achieve these through Whole Foods. That doesn’t mean the acquisition of Whole Foods was wrong or that it has failed, but only that it’s just one piece of the jigsaw in terms of what Amazon wants to achieve. Why is Amazon so desperate to grow in grocery? Several reasons: the amount of detailed customer data it can gather, the frequency of purchase which offers great economies of scale with other parts of the business, the high sales values, the potential to disrupt the biggest part of the retail market, and an opportunity to create a retail footprint that can be used to support the fulfillment ecosystem. Will disruption be easy? Yes and no! Grocery is a very tough business to crack. It is low margin, habitual and requires real economies of scale and efficiency to work. However, most mainstream U.S. grocers don’t do a great job and the market is ripe… Read more »

The consensus is that the grocery industry is ripe for disruption. Amazon sent shockwaves though the grocery sector when they acquired Whole Foods. However, the organic holistic living sector represents such a small sector of the industry.

We should expect Amazon to leverage their learnings from their Whole Foods experiences and very aggressively apply them to a conventional grocery store model. The “everything in one place” conventional grocery model works well with Amazon’s value proposition. Plus if and when they go full steam ahead, via acquisitions or aggresive store openings, these locations will serve as yet another place to mitigate the last mile challenges.

Perhaps Amazon has noticed that grocery delivery isn’t terribly profitable, and the fact that you really can’t get sundries like paper towels (unless you are very specific in your tastes) at Whole Foods says they’ve decided to give it a full-blown go.

Is it bad for the industry? Well, Amazon is going to have to differentiate in a space that has been working hard to do that for a while. Is it good for Amazon? I don’t think it’s as easy as they think — it will be fun to watch.

I don’t see a major impact for Whole Foods as the conventional grocery store is a different target market. Local chains will feel some impact, but the companies who should be worried the most are the value stores whose stigma was finally wearing off and have been growing in popularity recently with the younger generations — stores such as Aldi.

We should prepare for an incredible irony:

Looking at both purchases of traditional operations made by Bezos and/or Amazon, the Washington Post and Whole Foods suggests it will be a grocery store. Sure, Amazon PR would tell us it’s “entirely different — re-invented.” There will be a few tech gizmos around as if to shout “really, we’re different — we really are!”. But at the core, it will be a grocery store and not so dramatically different. That’s what Amazon does – tells us it’ll be different then delivers the same.

So why would they go in this direction? They need profits from retail-like sales. Yes, I’ve seen all the arguments. But Amazon remains profit-less from over 50 percent of its revenue. It is under increasing pressure to change that and, given $28 billion spent on shipping last year, they can’t — without brick-and-mortar OR without shrinking by half. Since the second isn’t a viable option, the next step is grocery.

One thing Amazon is good at is disruption. They approach problems differently and find unique ways to solve them. After a year of learning from their While Foods acquisition, they may have some tricks up their sleeve that may position their grocery stores to be wildly successful. Or they may not, but if anything Amazon is not afraid to fail and profit margins have always been lower priority. It will be interesting to watch.

If anything, Amazon is a learning organization. Whole Foods is a niche player Amazon purchased to learn as much as it could. While the addition of the Prime Now presence at WF seems clunky, I expect the data they are creating is more valuable than margin.

The advent of a full line traditional grocery makes perfect sense. It fits with Amazon’s scale, and there is a lot of real estate and operational opportunity out there with struggling regional chains.

If there is customer loyalty in this category, it’s based on proximity and convenience. With the advent of Instacart, Kroger’s Click List, etc., the retailer is becoming increasingly less important than the products and brands that people know.

Can Amazon win that battlefront? Absolutely.

I would be willing to bet that in the dark recesses of the Amazon Strategy Lair, there’s a huge target with a bullseye that says “Walmart Grocery” in the middle of it. Folks, that’s a $255+ billion nut that is predominately tied up in “old” retail; you know, the kind that makes the consumer do all the work. #crushable.

And don’t think for a second think that Walmart doesn’t know that bullseye exists either. Their moves with Jet and BOPIS and ship to home show the kind of sense of urgency that might (operative term) hold off the yellow smiley hordes for a bit.

Also, think of AMZN’s recent efforts: Whole Foods, Go, Fresh, their online grocery delivery service and now this news should ALL be signals that yes indeed, that bullseye does in fact exist.

Amazon making a bigger move in grocery through physical stores is inevitable to sustain their hyper-growth. Whether they do it organically and/or with acquisitions it will be transformative for the industry.

Whole Foods addresses a particular niche. This play is to take on the broader mass market so I doubt the impact on them would be significant.

Good news for Amazon. A real threat to conventional supermarkets that play in the middle of the market. Amazon might be further enhanced by considering the inclusion of some value retailers in its expansion strategy. After all, Amazon positions itself as the convenient, customer centric, value retailer. I predict minimum impact on Whole Foods.

Launching a new grocery concept or acquiring a chain, or multiple regional chains, is essential if Amazon wants to challenge the grocery leaders. Expanding Whole Foods locations, is not the answer, as the brand does not have broad enough consumer appeal because it has the reputation of being too expensive for middle and lower income groups. Beyond its perception of being too expensive, Whole foods only has approximately 500 stores, throughout Canada and in 42 U.S. states. To compete with the leaders, Amazon needs a lot more stores, as Kroger has approximately 2,800 stores and Walmart has around 5,300 stores in the U.S. The additional store locations will also provide Amazon more local distribution points for merchandise pick-up lockers and home delivery of grocery items. This is a smart move for Amazon and a bad day for the other big players. Amazon can bring more healthy choice options to traditional grocery shoppers, expand their Amazon Prime footprint and expand their point of presence to the majority of US households. They need the Walmart type point… Read more »

Fascinating. I have long held the belief that the geographic footprint of grocers makes them valuable in terms of being a pick-up point and local distribution center for omnichannel orders – be that food or non-food. Amazon creating a grocery chain would reinforce that belief.
Existing grocers would need to ramp up their efforts to be able to offer the same – employing marketplace options, intelligent fulfillment and other changes as appropriate to compete.

In terms of Whole Foods, they have a very clear target demographic – creating a grocery chain with a different demographic should have very little impact.