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Amazon, after buying Whole Foods, may open a new supermarket chain

Amazon, which rattled the grocery industry when it purchased Whole Foods, is now looking at opening a separate set of supermarkets across the U.S., according to a report in the Wall Street Journal

The e-commerce giant is negotiating putting supermarkets in several cities, including Chicago, Philadelphia and San Francisco, according to the Journal citing people familiar with Amazon’s plans. The first of what could be dozens of storefronts  may open in Los Angeles in the next several months.

Amazon said in an email that “per company policy” it “doesn’t comment on rumors or speculation.” 

Amazon bought Whole Foods, for $13.7 billion in 2017. But unlike that chain, known for its select foods and high prices, the new markets would have different, more affordable offerings.

And even as it reportedly signs leases, Amazon is also considering buying existing regional companies to more quickly grow the new chain’s footprint, the Journal says.

Amazon, which has upended the entire retail landscape by accelerating the shift to online shopping, would grab an even stronger foothold in the $750 billion grocery market if it opens new supermarkets.

It’s already introduced a new grocery concept with Amazon Go, which cuts out cashiers by enabling customers to scan an app, and automatically make purchases as they peruse the aisles. The company has opened Amazon Go stores in Seattle, Chicago and San Francisco, with more planned in those cities and elsewhere.

And at a time when retailers like Walmart are expanding an option that enables customers to buy groceries online, then pick them up or have them delivered, Amazon has also begun a curbside pickup service at some Whole Foods locations for members of its Prime subscription service.

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But the new supermarket chain that is reportedly being considered is a “game changer,” says Bob Phibbs, CEO of the New York-based consultancy The Retail Doctor.

The Whole Foods purchase gave Amazon the education it needed to expand in the grocery space, he says.

“Ninety percent of groceries are still sold in brick-and-mortar,” Phibbs said. “Now, they can take that (information) and leverage that. It’s taking all their knowledge and data and having more of a laboratory that makes them more money … If I were Kroger, I wouldn’t be sleeping tonight.”

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Kroger could not immediately be reached for comment. But shares in the Cincinnati-based chain were down 4.26 percent to $28.08 in afternoon trading. Walmart shares also slipped 1.02 percent to $97.98, but the stock price of other major grocery sellers such as Target, Costco and BJ’s rose. 

Phibbs also views Amazon’s grocery development as the company’s way to get more information about its shoppers, from their health to their favorite brands. “It’s all about data,” he said. 

Phil Lempert, founder of supermarketguru.com, which tracks industry news and trends, said the stores will likely not be the same as traditional grocery stores, but more like big-box stores that have large food departments, like Walmart, the biggest grocery seller in the U.S., and Target.

“They will have groceries, but also lots of other products Amazon sells,” he said. “The Amazon strategy I would think is we shop for groceries more often than anything, so if they can get you to go a store with all sorts of other Amazon products in it, they can increase traffic to that store.”

Lempert pointed out the irony that this Amazon grocery push is coming days after Yahoo News reported that Amazon was killings its Whole Foods 365 stores, which offered a lower price alternative to the original locations.

But the appeal of the new supermarkets could be a more interactive, experiential feel than its rivals, which will appeal to the millennial and Generation Z shopper.

“If they go the high-tech route for non-foods departments and maybe even foods departments, it’ll be a hit,” he said.

 

Read or Share this story: https://www.usatoday.com/story/money/2019/03/01/amazon-after-buying-whole-foods-may-open-new-supermarket-chain/3029489002/


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