Retailers

Former Amazon Exec Saw Grocery Expansion Coming

In NGA address, Furphy said Amazon ‘would figure out the right formats’
Photograph by WGB Staff

That Amazon is reportedly at work on physical grocery formats that would differ from its current fleet of Whole Foods Markets would come as no surprise to attendees of this week’s National Grocers Association Show, where former Amazon executive Tom Furphy in a presentation told attendees he anticipated the very same move.

“I would not be surprised if you saw some other kinds of grocery formats hit the street for them,” said Furphy, who developed the Amazon Fresh program before leaving the company to run a Seattle-based consultancy, Consumer Equity Partners, where he is CEO. “I don’t think they will settle just on big-box grocery. They will figure out what are the right formats for the right customers and the right geographies. So don’t be shocked it you see more grocery format innovation out there.”

Furphy’s remarks came in a presentation during NGA’s annual convention in San Diego. He was not immediately available for further comment to WGB.

The Wall Street Journal on Friday reported that Amazon is poised to open “dozens” of new grocery stores in major U.S. cities, including one in Los Angeles as early as this year. The stores would likely be about 35,000 square feet and have a different assortment of items than a Whole Foods typically would—and could be acquired from regional supermarket chains, according to the WSJ report, which was based on anonymous sources. Amazon had no further comment.

According to Furphy’s presentation, Amazon would develop physical retail stores based on learnings from sales in the digital channel and from Whole Foods. Furphy said Amazon looked at Whole Foods from the start as a “compromised asset” from which it could learn.

“If you see them stub their toe with Whole Foods, they’re fine with that,” Furphy said, referring to a mantra of Amazon CEO Jeff Bezos: “It’s not an experiment if you know it’s going to work.”

The news triggered stock in some grocery chains to slide—as they did in 2017 when Amazon announced the Whole Foods deal. Sources said further expansion in grocery by Amazon would challenge existing chains to strengthen their own omnichannel abilities.

Sylvain Perrier, CEO and president of the grocery-focused technology company Mercatus, speculated that Amazon would develop a value-focused format he called “Prime Grocery.”

“Amazon-branded stores can anchor the value end of the market, while Whole Foods continues to attract more affluent, health-conscious consumers,” Perrier said. “And as Amazon rolls out a growing number of brick-and-mortar locations, traditional grocers can no longer rely on their physical footprint alone to differentiate themselves from the online juggernaut.”

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