Already having humbled America’s largest grocery retailer and largest brick-and-mortar chain, Amazon now intends to match its highly vaunted system of distribution and fulfillment against what used to be the gold standard of distribution and fulfillment in retailing: Walmart’s own system.
Because Amazon reportedly plans as many as 2,000 Amazon Fresh quick-pickup grocery stores over the next 10 years, this particular maneuver may well determine which company ends up dominating retailing similar to Walmart’s efforts to catch up with Amazon in pure e-commerce.
Grocery retailing is an infamously low-margin business. And no less formidable a brand than UK’s Tesco recently crashed and burned in its own efforts to establish a chain of smaller-format grocery stores in the US.
But the weekly and sometimes daily trips Americans make in search of groceries could provide Amazon with an advantage of traditional retailing: the opportunity to cross-sell and upsell consumers who are visiting your brand in person.
Also, having essentially created ubiquitous e-commerce, and having built an impressive, super-efficient, nationwide chain of warehouses to fill its online orders, Amazon now intends to prove its mettle in one of the most old-fashioned forms of retailing: selling food.
“Grocery is the company’s biggest potential for revenue upside,” said John Blackledge, an analyst with Cowen, according to NACSonline.com. He estimated that Amazon is on track to increase its food and beverage sales from $9 billion this year to $23 billion by 2021. Right now, Amazon has only 1 percent of the US grocery market, based in large part on its rapidly expanding Amazon Fresh delivery service.
Exactly how it will grow isn’t clear just yet. Last month, Amazon announced that it would be opening a drive-in store as well as convenience store locations in its hometown of Seattle, the Financial Times reported. It will reportedly be available first only to Amazon Fresh delivery members.
According to the report, the soon-to-open Amazon Fresh store features a large pickup are for customers, who will order groceries online then drive to the location, where someone will bring out their order. Amazon believes that its customers prefer to pick out meat and produce in person, on the way home from work for instance.
Other aspects of the store could be “click-to-pick-up,” while customers also could order peanut butter, cereal and other goods with longer shelf lives for same-day delivery. Amazon Fresh stores certainly will make heavy use of mobile e-commerce. And the Wall Street Journal reported that Amazon is developing license-plate-reading technology to speed wait times.
Of course, Walmart’s command of the US grocery market is through its massive supercenters, where high volume, low prices and even an increasing lineup of organic goods provides its dominance—as well as the efficiencies of its legendary supply chain
But Walmart also is testing an expansion of its pickup sites. If you’re going to go toe-to-toe with Amazon across the board, it helps to have as many toes as possible.