Amazon is looking to upend the grocery industry again, this time by launching a new grocery chain separate from Whole Foods. The first location — there will reportedly be dozens — is set to open in Los Angeles by the end of 2019, and Amazon's signed at least two more leases for stores that would open in early 2020, though Amazon could still back out, sources told The Wall Street Journal. Amazon is also in talks to open locations in shopping centers in major cities including Seattle, San Francisco, Chicago, Washington D.C., and Philadelphia, and may supplement its expansion plans by acquiring regional chains with around a dozen locations each. The stores are expected to stand around 35,000 square feet; for context, standard Whole Foods stores are approximately 43,000 square feet on average, according to CNBC. It's unknown if the chain will bear Amazon’s branding.
This raises a number of questions about Amazon’s intentions, what these stores will feature, and how this move will affect the grocery industry.
Why is Amazon doing this when it already acquired Whole Foods in 2017 for $13.7 billion?
- Whole Foods’ standing as a more local and upscale grocer has made it difficult for Amazon to adjust its selection and lower its prices, but a new chain gives it a fresh start. Amazon had difficulty creating a consistent product selection at all Whole Foods stores and bringing in mass market products like Coca-Cola — both of which may have helped it attract more customers — because cutting out local suppliers and stocking lower-quality goods could have alienated customers. The inability to take these actions made it harder for Amazon to lower Whole Foods’ notoriously high prices. The e-tailer will be able to mold the new chain’s selection and pricing as it sees fit, allowing it to compete how it wants to in grocery.
- Amazon can build new stores with e-commerce in mind, while it’s had to retrofit its processes for Whole Foods. Prior to the acquisition, Whole Foods had a partnership with Instacart but no other e-commerce offerings of note. Amazon has since started offering on-demand delivery through Prime Now and pickup at some stores, but Whole Foods [...]