Sep 14, 2020
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About this Deal
Amazon is the king of e-commerce, but the company is increasingly looking to grow through its brick-and-mortar holdings.
In recent years, it's opened a number of Amazon Books stores and Amazon 4-star stores, small-footprint locations that showcase Amazon gadgets as well as books and well-reviewed items, and its 2017 acquisition of Whole Foods made it a sizable player in physical retail. Now the company is taking its latest step into the brick-and-mortar world with its first Amazon Fresh supermarket, which opened in the Woodland Hills section of Los Angeles at the end of August.
The store will have some similarities to Whole Foods, including the availability of 365 by Whole Foods Organics, but will offer name-brand products like Coca-Cola and Kraft Mac and Cheese that are unavailable at the organic supermarket chain, as well as seemingly lower prices than Whole Foods. Amazon also promises that Fresh will offer same-day delivery – free for Prime members – and pickup, as well as a smart cart it calls Dash Cart that automatically scans and charges customers for what's inside when they leave the store.
The opening was not a surprise, as reports have indicated Amazon's plans to open a non-Whole Foods grocery store in Los Angeles. Along with several other moves, it shows the company's ambitions in selling groceries, especially with a hybrid model, continues to expand. Whole Foods has brought order pickup capabilities to nearly all of its stores, tripling capacity from March. Amazon is also planning to lease space from an existing Kohl's for a second Fresh supermarket in Southern California, which could lead to more stores inside Kohl's, and the company is opening its second Go grocery store, a larger version of its cashierless Go convenience stores. Finally, it just opened a "dark" Whole Foods store in Brooklyn that is tasked only with fulfilling orders. Customers cannot shop there.
A collision course
Amazon has a number of advantages over Walmart, including its third-party marketplace, Prime membership base, and wide selection, but the e-commerce giant trails Walmart by a wide margin in groceries. Groceries are a key category in retail – they drive frequent purchases and loyalty and include essential items, as the pandemic has reminded us. They're also the source of about $200 billion in annual sales at Walmart U.S., which does not include Sam's Club.
Amazon Fresh: Opens first supermarket in Los Angeles with checkout in cart
Amazon launched Fresh online in 2007, and its Whole Foods acquisition a decade later signaled its seriousness about the $800 billion industry, but the company's lack of a store base puts it at a significant disadvantage in the grocery battle against Walmart, which has more than 4,000 stores across the country and claims to have a location within 10 miles of 90% of the U.S. population. That allows Walmart to offer pickup and delivery from thousands of stores, giving it a scale that Amazon can't match.