Amazon confirmed that it plans to open a new grocery store brand in the Los Angeles area next year, beginning the latest phase of its brick-and-mortar expansion.
The move, which has been rumored for months, will expand grocery offerings beyond the upscale selection shoppers typically find in stores such as Wholesale Shops locations and its smaller cashier-less Amazon Go facility.
This is the latest move by Amazon into brick-and-mortar, a class that stretches back to its early existence as it has fundamentally shifted the retail landscape and has led more and more shoppers to their prime fast-shipping Membership program and other perks have led to buying online. . Market-research firm eMarketer expects Amazon to account for about 37.7 percent of all US e-commerce sales this year.
However, over the years, Amazon has become focused on physical retail as a strategic initiative, including pop-up stores, bookstores and other locations.
Opening mainstream grocery stores is a “natural development” for Amazon, UBS Securities analyst Eric Sheridan wrote in a recent report. The company can use locations in new markets as distribution points for grocery distribution, something it already does with wholesale stores.
If Amazon makes delivery contingent on being a member of its lucrative Prime program, it can “act like a tailwind to prime membership growth over time,” Sheridan wrote.
Amazon spokesman Pia Arthur said the company plans to open its new grocery store in Woodland Hills, California, just north of Los Angeles.
Tech news website CNET first reported the new location, after which the company published a job posting for it. One opening encouraged job seekers to join the company, “We start Amazon’s first grocery store in Woodland Hills.” The Wall Street Journal reported in March that Amazon was eyeing expansion into the grocery business.
Food has long puzzled online retail giants, due to the fickle nature of consumer shopping habits and the difficulty of predicting how much fresh food to order and when. The company extended its AmazonFresh delivery service back to some zip codes in 2017 after struggling to make it work.
The company has learned from the acquisition of Whole Foods in the same year, and is rapidly expanding its footprint in two-hour grocery deliveries. Recently, the company also started free delivery with Prime Membership.
The company has not yet formed a relationship with the Amazon brand in the grocery business. The market is already crowded, and has strong preferences for consumers when it comes to where they shop.
The new stores will not be Whole Foods and, unlike Amazon Go’s cashier-less check-out system, they will have traditional check-out lanes. And unlike Whole Foods’ natural-food focus, the new locations are likely to carry brand-name sodas, cereals, sweets and more to cater to a wider base of customers.
Revenue from Amazon’s physical locations halted in the previous quarter. In the three-month period ending September 30, sales from grocery locations as well as its bookstore and other brick-and-mortar businesses were down 1 percent to $ 4.2 billion. Amazon’s total sales rose 24 percent to $ 70 billion in the quarter.
Amazon offers online grocery options, such as AmazonFresh and Prime Now delivery businesses. They compete with services like Instacart, delivering perishable and non-perishable items within a few hours. According to Citi Research’s 2017 report, most consumers prefer to shop for their main shopping-list items.
The grocery expansion confirms Amazon’s rivalry with Walmart, the nation’s largest retailer as well as the largest seller of groceries. Analysts have said the move could help consumers shop from Amazon, given the regular pace of grocery shopping.
Owning to physical retail gives shoppers more room to make returns, which is one of the expensive aspects of running an online store. Amazon is already partnering with Kohli for free returns.