Amazon.com is looking to open 20 brick-and-mortar grocery stores over the next two years under the Amazon Fresh banner, and believes the U.S. grocery landscape could accommodate up to 2,000 of them over the next decade.
Seattle-based Amazon, according to a BusinessInsider.com report citing documents from the e-commerce giant, plans to operate a 20-location pilot program in places such as Seattle, New York, Miami, the Bay Area and Las Vegas by the end of 2018. Ten of the stores are planned to be click-and-collect locations for order pickups, while the rest will be traditional locations.
Although the total number of grocery stores has not been finalized and is subject to change, the documents mention a proposed annual launch schedule of 200 stores, each supported by a new generation of distribution centers. Some of the documents say the click-and-collect spots will be 10,000 square feet, while the traditional stores could be as large as 30,000 square feet. Technology such as license plate scanning, in-store kiosks and a rapid drive-through pick-up option also are being considered.
Many industry observers have predicted that Amazon would move into this sector, looking to fresh grocery to fuel its continued rapid growth – the company has tripled in size over the last five years and accounted for 50 percent of all retail growth in 2015. What’s noteworthy, however, is the speed at which the e-tailer is expanding.
“Amazon has long been known for sacrificing short term profits for long term opportunity,” says Sterling Hawkins, operations and venture relations at the Los Angeles-based Center for Advancing Retail & Technology. “They’ve been studying grocery for years and with this additional focus, their ability to learn and willingness to invest could make them a national grocery player in a relatively short amount of time.”
Of course, this move on Amazon’s part is both bold and in need of careful consideration and execution. Paul Milner, marketing director at UK-based electronic shelf label provider Displaydata, notes that staying on top of perishable items can be an “arduous task,” even for the largest of grocers.
“Food waste is still an ongoing concern,” he says, “but can be controlled through dynamic pricing initiatives that encourage shoppers to purchase those items before they spoil.”
However Amazon plans to make its moves, grocers need to be prepared. Although this is just a “warning shot” from Amazon, chains that don’t move now to “usher in the new era of retail” will find themselves left behind in just a few years, Shekar Raman, co-founder and CEO of Iselin, N.J.-based digital shopper engagement firm Birdzi Inc., warns. Leveraging customer data, improving personalization, mobile centricitiy and building efficiencies into in-store experience are the only solutions for grocers seeking to survive in this new era.
“Of course, there are tens of thousands of supermarkets, and I don’t mean to spell gloom and doom,” he says. “But future is evident, and early movers will be the only ones to prosper in this new tomorrow. Supermarkets who build deeper relationships with their communities, get smarter with their data and build strategic partnerships to stay in the technology game are sure to weather this change. Game on.”