Retailers

Amazon Opens Long-Awaited Fresh Store, Heralding Another New Industry Era

Tech giant describes omnichannel offering, prepared foods, 'consistently low prices'
Photograph courtesy of Amazon

It’s Day One all over again at Amazon, and potentially, everywhere else.

The Seattle e-commerce giant said this morning it was opening its long-awaited grocery store near Los Angeles to select customers, marking the debut of a foray into brick-and-mortar grocery eventually expected in hundreds of U.S. locations and unleashing a potentially dangerous new menace to established U.S. supermarkets.

Known as Amazon Fresh, the store is designed from the ground up to offer a seamless grocery shopping experience, free same-day delivery and consistently low prices, according to a release. It will stock a selection of national brands, fresh foods, prepared items and private brands, and it will feature proprietary technologies, including the previously announced Amazon Dash Cart offering a checkout-free experience and Alexa features that the company said would help shoppers manage their lists and better navigate aisles.

Amazon—which despite wild success in nearly every area of U.S. commerce and long a disruptive presence in the supermarket industry through center-store erosion, its ownership of the Whole Foods Markets brand and fresh food delivery—hopes the new concept will provide it with the greater frequency of shopping trips, deeper customer relationships and high customer counts inherent in physical grocery.

Amazon’s arrival in grocery represents a particularly powerful threat inasmuch as the company’s massive profits, cheap cost of capital and long-term outlook can support investment to grow and lose money as it does. It also has more than 100 million paid loyalty members. Thirty years ago, Walmart moved from discount department stores to grocery-anchored Supercenters with some similar advantages and has long since become the largest seller of groceries in the U.S.

Amazon, however, is also facing an industry well-prepared for its arrival—in large part because of Amazon’s acquisition of Whole Foods Markets in 2017. That event helped to kick off abrupt change in the posture of the industry, with retailers since investing billions in digital transformation, mergers and acquisitions. Many of those retailers, including Walmart, Albertsons, Kroger, Publix, H-E-B and Ahold Delhaize, are themselves experiencing an unprecedented boom, with the coronavirus crisis triggering soaring sales at the same time that behind-the-scenes investment better prepared them to handle the additional volume and growth into new channels.

Whole Foods, in the meantime, appears to pursuing a new concept of its own, building an Ideal Market at a site in Denver that was expected to have housed a Whole Foods, WGB reported.

Amazon Fresh Stores is headed by Jeff Helbling, an Amazon VP since 2012 and a former principal at McKinsey Co.

“I’m excited to announce that starting this week, we’re opening our doors to a select group of invited customers in Woodland Hills, Calif., to shop the store before it opens widely to the public in the coming weeks,” Helbling said in a statement.

The company said shoppers at the store would find a wide assortment of national brands and high-quality produce, meat and seafood. Plus, its culinary team offers customers a range of delicious prepared foods made fresh in store. The Amazon Dash Cart, which enables customers to skip the checkout line, and new Alexa features in the cart, as well as store-floor kiosk, will help customers manage their shopping lists and better navigate aisles.

Amazon said the store will offer same-day delivery and pickup direct from the store. Press materials do not mention a microfulfillment capability despite widespread speculation one is installed there. Customers can pick up their orders by visiting the service counter or by pulling up to a dedicated pickup parking spot. Amazon Fresh also offers Amazon.com package pickup and free package-less product returns.

Amazon described offering “consistently low” prices at the stores, indicating as expected, its grocery store would shoot for wider appeal on price than its organic Whole Foods sister. Amazon cited Fresh brand Natural Whole Chicken with no added hormones for 99 cents per pound; a 3-pound bag of onions was priced at $1.69; and a 10-count of Quaker Oatmeal for $2.50.

Additionally, customers can earn 5% back at Amazon Fresh when they use their Amazon Prime Rewards Visa Signature Card or Amazon Prime Store Card at checkout.

More detail can be found on the store's website.

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