Amazon Expands into Food Sales, Tests New Grocery Stores

Amazon introduced its first brick-and-mortar store that is part of Project Como, aimed at garnering a market share of food sales. The “small format” Amazon Go, one of three different types of grocery stores the company plans for the coming months, will open in early 2017. In the next few weeks, Amazon will also open two prototypes of another format, a drive-through without in-store shopping. Depending on the results of the tests, Amazon plans to open more than 2,000 such brick-and-mortar grocery stores.

The Wall Street Journal notes that Project Como’s third format will be “the newly approved multi-format store, [which] combines in-store shopping with curbside pickups.” Grocery and retail consultancy Brick Meets Click chief architect Bill Bishop calls Amazon’s grocery pickups “part of their secret sauce in terms of all of the different ways in which they can engage the customer in bringing the product to them.”

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“Everyone is looking at grocery because of frequency,” he said. “Frequency guarantees that you have density.” In comparison, Kroger runs 2,800 grocery stores in 35 states.

The 1,800-square foot Amazon Go in downtown Seattle is streamlined with AI technology “that eliminates checkouts, cash registers and lines.” According to Digital Trends, Amazon Go, which will offer “ready-to-eat breakfast, lunch, dinner, and snack options, created daily by on-site chefs, local kitchens, and bakeries,” is powered by what Amazon calls “the same types of technologies used in self-driving cars: computer vision, sensor fusion, and deep learning.”

Prior to Project Como, Amazon’s entrée into groceries has been subscription-service Amazon Fresh, which delivers online orders. But that format is “logistically complex,” and composed of “less profitable routes, where stops are spread far apart.” Kantar Retail reveals that, “online purchases comprise about 1 percent of the $674 billion market for edible groceries.”

The multi-format store, which may open by late 2017, will “likely adopt a 30,000- to 40,000-square-foot floor plans and spartan stocking style like European discount grocery chains Aldi or Lidl, offering a limited fresh selection in store and more via touchscreen orders for delivery later.”

Walmart is also expanding into curbside pickup, which “offers some convenience without the cost of home delivery.” Its second Pickup and Fuel store, in Denver, offers “a limited selection of fresh food, snack and gas as well as allowing shoppers to pick up online grocery orders.” Target has considered delivering its groceries, but “hasn’t moved forward with the idea.”

Amazon is interested in becoming “a grocery-delivery service and distributor for brick-and-mortar retailers,” in part to lower its own costs, but “analysts say that many retailers would be reluctant to hand over the reins to Amazon.”

UPDATE:
Amazon Says It Doesn’t Plan to Open 2,000 Grocery Stores, The Wall Street Journal, 12/8/16