Amazon recently announced that it will open a new, full-size grocery store in Los Angeles next year. The store will not be affiliated with Whole Foods and instead will feature lower prices and more mainstream products. The flagship location marks the beginning of a distinct line of businesses that reflect Amazon’s continued interest in the grocery sector.
Today, Walmart dominates the space and captures one-fourth of the total market, which is valued at $900 billion. Although the Whole Foods purchase made headlines, Amazon has yet to capture a meaningful market share. On top of that, Whole Foods’ catalog seems misaligned with Amazon’s vision to give consumers what they want when they want it.
Amazon’s New Grocery Chain
Amazon’s new grocery chain was first announced last March. The company expressed interest in going deeper into the traditional grocery market and competing with brands such as Kroger, Walmart, and Publix in major U.S. cities.
Now, we know that Amazon’s first grocery location will open in Woodland Hills on the northwest side of LA. Amazon has also signed leases in other cities, including Philadelphia and Chicago, for future expansion. The grocery chain will launch under a new brand that is separate from Amazon Go and Whole Foods. Its new stores will not feature cashier-less checkout technology.
The growth strategy around the new venture is centered on acquisitions of smaller grocery chains. Stores will also emphasize customer service and pick-up capabilities to mimic what other industry leaders are doing.
Recapping Amazon’s Acquisition of Whole Foods
Amazon’s new grocery ambitions may confuse some after its previous Whole Foods acquisition. Amazon spent $14 billion in 2017 to purchase the high-end grocery brand, which built its reputation by selling organic-focused options. The move sent shockwaves through the grocery sector as Amazon plays by a different set of rules and ROI calculations.
Since then, the Whole Foods acquisition has led to a number of changes. First, Amazon Prime brought a version of the membership model to Whole Foods that didn’t exist previously. Now, shoppers have access to weekly sales and discounts. Meanwhile, prices have come down by as much as 20 percent.
Another impact was the dissolution of the Whole Foods-Instacart partnership for home grocery delivery. However, Amazon equipped Whole Foods with many online tools, including the ability to fulfill online grocery orders in as little as two hours. As of last month, Amazon Prime members now have access to AmazonFresh home grocery delivery for free.
What Else is Amazon Doing?
It’s hard to go a day without engaging with Amazon’s brand or hearing about the company in some manner. The e-commerce giant has its hands in many cookie jars thanks to its massive distribution infrastructure.
Beyond grocery stores and e-commerce, Amazon now has a footing in the pharmacy, smart home, video game, and content streaming sectors. The company purchased Ring, a developer of WiFi-enabled doorbells, and PillPack, an online pharmacy, in 2018, just one year after the massive Whole Foods deal.
Last month, Amazon announced a slew of new smart speaker products, including the Echo Frames, which mark the company’s first expansion in the smart glasses world. Overall, Amazon has sold over 100 million Alexa devices.