Online retailer attempts to drive into the $800bn US grocery market
Amazon has opened its first full-offering grocery pick-up stores in Seattle, in its latest push to test brick-and-mortar concepts and gain a foothold in the elusive US grocery market.
The two stores are based around a drive-in service, with customers ordering groceries online and then picking them up kerbside without leaving their vehicle. Amazon is taking aim at the $800bn US grocery market — where shopping still occurs mostly offline — through the trial of various retail concepts. In December it launched its first cashier-less convenience store, which allows customers to walk in and walk out without stopping in a checkout line. However that store, which is only open to employees presently, has experienced technical problems which have delayed its opening to the public. Amazon also offers a subscription grocery service, Amazon Fresh, in more than 20 cities. However, the home delivery service, which costs $15 a month, is much more expensive to operate than the drive-in grocery stores. The drive-in stores, dubbed “AmazonFresh Pickup”, are open only to Amazon employees, and the company has not given a date when they might be open to the public.
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To use the service, customers place orders on the Amazon app, and then specify a pick-up time, which can be as little as 15 minutes after the order is placed. Once the stores are open to the public, they will be free for all Prime members. Amazon’s decision to launch drive-in stores will heighten competition with Walmart. Last year Walmart paid $3bn to acquire Jet.com, an online shopping company that billed itself as an Amazon competitor. While the rivalry between the two was previously focused on online sales, Amazon’s new service will compete more directly with Walmart’s brick and mortar stores. Walmart has offered kerbside grocery pick-up for years, although that service is provided in its regular Walmart stores, unlike Amazon’s stores which are pick-up only. John Blackledge, analyst at Cowen and Company, noted that the US grocery market was “Amazon’s biggest potential source of revenue upside,” in a note to clients. He pointed to Amazon’s multi-pronged approach to groceries, including delivery and pick-ups systems. “We believe this approach gives Amazon flexibility to address different aspects of the US grocery market,” he wrote. Amazon has been tight-lipped about its plans for further grocery stores, and said little about its broader retail strategy. The company has also opened five physical bookstores — in which books are heavily discounted for Prime members — and announced plans to open a further five bookstores. With $136bn in annual revenues and sales growth of 27 per cent year-on-year, Amazon has largely succeeded in dominating the American online shopping market. However grocery shopping still remains a largely offline activity in the US — much more so than in other countries such as the UK.