New Amazon Grocery Chain

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Bagels
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Re: New Amazon Grocery Chain

Post by Bagels »

pseudo3d wrote: January 30th, 2020, 5:39 pm I disagree that the "era of large supermarkets is coming to an end". Sure, there aren't as many traditional supermarket chains anymore and square footage is no longer increasing, but when chains like H-E-B are still pushing out 70k+ square foot stores even in dense, urban footprints (and other independents like Hy-Vee and Giant Eagle continue to work with large stores) while smaller prototypes (both from small store chains and large chain prototypes) from a variety of contenders are hit and miss, the death of such stores is highly exaggerated.
In general, the traditional grocery stores being built today are smaller than those built in the 2000s. Sure, there's chains and geographic markets that are exceptions, but the trend of smaller stores will continue for three key reasons -

(a) fewer shoppers are purchasing non-food items from traditional supermarkets: Older Millennials are far more likely to purchase non-food items elsewhere, whereas younger Millennials are skipping the traditional supermarket altogether. Traditional supermarkets were hopeful that as older Millennials reached peak earning years they'd place more value on their time and purchase more non-food items, but that hasn't occurred and appears unlikely.

(b) It's expensive to carry a large selection of the same item, and online shopping/distribution centers provides an alternative option. If, for example, 80% of unit sales of ketchup go toward the lowest priced ketchup + the most popular brand, then it doesn't make sense to stock a dozen brands, and a half-dozen varieties of each brand. If somebody wants French's brand or No Salt Added Heinz brand, they can now order the product online and have it shipped to the store or their home. It just doesn't make sense for the product to take up valuable real estate - and a disproportionate amount of product will be tossed upon expiration.

(c) Unit sales of center store items continues to decrease. Unit sales of things like cereal, classic canned goods, etc. continue to decrease, as consumer preferences shift. To be fair, advances in technology and food preparation has largely made canned veggies, classic Campbell's soups, Chef Boyardee, canned chicken, etc. obsolete, so it's not surprising this is happening.

Amazon's concept grocery stores are suppose to tackle these points -- they're suppose to be aggressive on price, emphasize fresh food + ready-to-eat food, and offer selection limited to the most popular brands (with the option to purchase others online, for delivery). We'll see how it does...
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Re: New Amazon Grocery Chain

Post by J-Man »

Article about another potential Amazon grocery store in a former Babies'R'Us in Irvine, CA.
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Re: New Amazon Grocery Chain

Post by pseudo3d »

Bagels wrote: January 30th, 2020, 11:59 pm
In general, the traditional grocery stores being built today are smaller than those built in the 2000s. Sure, there's chains and geographic markets that are exceptions, but the trend of smaller stores will continue for three key reasons -
I don't think that's really the case.

Albertsons has obviously cut back on the huge expansion done in the late 1990s and early 2000s, and most of the "new build" stores in the past four years or so have largely been previously promised to build under Safeway (like the new Albertsons in Las Vegas that was planned to be a Vons before Safeway suspended the project on economic reasons. Still, Albertsons continues to experiment with larger stores, like the 100,000 square foot Albertsons Market Street in Idaho. Even now a 65k square foot Pavilions is being built in California.

Kroger has hugely cut down on new store construction, but again, Kroger has built 100,000+ square foot Marketplace stores.

Publix was never one for big stores, but newer stores haven't necessarily shrunk.

Wegmans is shrinking, but again, 75,000 square feet is still big.

H-E-B continues to build new stores even in urban areas that are a minimum of 70k square feet, if not over 100k.

Hy-Vee continues to build 70k+ square foot stores and has hit the 100k square foot barrier, expanding in Minneapolis.

Giant Eagle continues to build 70k+ square foot stores.
(a) fewer shoppers are purchasing non-food items from traditional supermarkets: Older Millennials are far more likely to purchase non-food items elsewhere, whereas younger Millennials are skipping the traditional supermarket altogether. Traditional supermarkets were hopeful that as older Millennials reached peak earning years they'd place more value on their time and purchase more non-food items, but that hasn't occurred and appears unlikely.
Millennials don't have the same purchasing power as the generations before them but general merchandise in grocery stores has ALWAYS been slow movers. Still, most of the stores still carry them for convenience sake.
(b) It's expensive to carry a large selection of the same item, and online shopping/distribution centers provides an alternative option. If, for example, 80% of unit sales of ketchup go toward the lowest priced ketchup + the most popular brand, then it doesn't make sense to stock a dozen brands, and a half-dozen varieties of each brand. If somebody wants French's brand or No Salt Added Heinz brand, they can now order the product online and have it shipped to the store or their home. It just doesn't make sense for the product to take up valuable real estate - and a disproportionate amount of product will be tossed upon expiration.
Walmart does this but again, consumers want selection, and cutting back just drives them to other stores. If I want something like a specific brand of ketchup that should be at the store but isn't, I'll go to another store, having it delivered later defeats the purpose.
(c) Unit sales of center store items continues to decrease. Unit sales of things like cereal, classic canned goods, etc. continue to decrease, as consumer preferences shift. To be fair, advances in technology and food preparation has largely made canned veggies, classic Campbell's soups, Chef Boyardee, canned chicken, etc. obsolete, so it's not surprising this is happening.

Amazon's concept grocery stores are suppose to tackle these points -- they're suppose to be aggressive on price, emphasize fresh food + ready-to-eat food, and offer selection limited to the most popular brands (with the option to purchase others online, for delivery). We'll see how it does...
Again, while the big grocery stores listed above generally have success (apart from outdated or "loser" stores) the chains that think that "small is good" have not been successful. Fresh & Easy is the most obvious example but The Fresh Market, Lidl, Lucky's Market, and no doubt others have gotten their lumps as they limp defeated out of the market while Albertsons-Safeway/Kroger/the big local option remain.

Aldi and Trader Joe's are older concepts that have spent decades perfecting their craft and working with their customer base, creating an offering that's very different from the traditional grocery store.

While Amazon definitely has funds, it doesn't seem to offer anything that will take away customers from the stores they normally go to (outside of a brief visit for novelty purposes), and will probably not make any waves—just like how the other Amazon concepts have had mixed results.
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Re: New Amazon Grocery Chain

Post by babs »

While Amazon definitely has funds, it doesn't seem to offer anything that will take away customers from the stores they normally go to (outside of a brief visit for novelty purposes), and will probably not make any waves—just like how the other Amazon concepts have had mixed results.
How about waiting until the store opens before making any judgement?
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Re: New Amazon Grocery Chain

Post by storewanderer »

babs wrote: February 8th, 2020, 11:26 pm
While Amazon definitely has funds, it doesn't seem to offer anything that will take away customers from the stores they normally go to (outside of a brief visit for novelty purposes), and will probably not make any waves—just like how the other Amazon concepts have had mixed results.
How about waiting until the store opens before making any judgement?
The biggest thing is Amazon says it may do something and it sets shockwaves through the grocery industry. Look at all the initiatives Kroger has been doing the past couple years to try to catch Amazon. Is Amazon even selling any more groceries now than they were a year or two ago? I'm not so sure. But Kroger has sure shifted a ton of capex spending to trying to combat Amazon, much to the detriment of their existing store base/store base expansion opportunities. All because Amazon says it will expand Whole Foods, or open hundreds of grocery stores, or says something else along those lines. All Amazon has to do is talk to set an established chain into a major strategy shift.
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Re: New Amazon Grocery Chain

Post by pseudo3d »

So apparently, the media has gotten a look inside and it's...very unremarkable, with center store aisles stocked with 365-brand products and national brands, along with meat/seafood counters, and prepared foods. Is it too absurd to think that the strategy all along was to spook the traditional grocers (mainly Kroger) into investing more into "technology" while ignoring stores (thus making Amazon's superior by default), or am I giving Amazon too much credit?
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Re: New Amazon Grocery Chain

Post by storewanderer »

So basically it is a Whole Foods, but with conventional products...

Does not sound like a reinvention of the grocery format in the slightest.

But it sure spooks the regular grocers. There is a risk here. Amazon will open these stores up and not care if they turn a profit or not. Meanwhile Safeway and Kroger are out there and still needing to turn a profit from operating stores and if Amazon takes even 10-20% of their traffic from nearby locations that may pose some problems for Safeway and Kroger.

The location selection alone suggests Amazon is throwing a ton of money at this and probably does not intend to make a profit on the venture.
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Re: New Amazon Grocery Chain

Post by cjd »

Does anyone get the impression that Amazon may be getting a bit too big for our good?

I guess it is basically the 21st century version of what Sears should or could have been. But for all the things Sears was involved in, it never got too far into the grocery market, and certainly not all of this Alexa and media stuff.

And even Walmart which too has been a dominating force, hasn't gone as far as to get into the media and electronics realm with private labeled items to the extent Amazon has.

While Walmart has certainly put a hurt on small businesses, I'm not sure whether Sears in its beginnings as a catalog company did or not. Competition is important and retailers need to be able to stay competitive in a healthy market, but I wonder if Amazon is being allowed to be too strong and overreaching at the moment, wanting to get into every branch of everything. Who knows, they may soon get into developing electric cars and selling them or even the mortgage business.

Isn't this getting to be somewhat of a trade issue or could it become one? I know it's highly unlikely we'll see Amazon opening grocery stores across the country, but who knows.

It just concerns me that Amazon is getting so big that it doesn't even need to worry about competition or making a profit in every sector in order to survive. Most other one trick operators such as Kroger or anyone else really doesn't have the ability to do that. I feel like Amazon may be turning into a multi-billion dollar bully.
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Re: New Amazon Grocery Chain

Post by storewanderer »

The only thing that will stop Amazon is itself. As long as the company keeps making moves that connect with more and more customers, and customers keep purchasing from them, they will continue to grow and dominate.

Many companies that looked unstoppable at one point in time took some wrong turns or were overtaken by newer more nimble players down the road.

Could Amazon be the one that is truly unstoppable? We will see.

I think we could easily see Amazon open grocery stores across the country. There is no shortage of vacant commercial space (and expect a lot more to become available in the next couple years) they can repurpose and while these may not be the best locations for new grocery stores, as Amazon has pointed out, they are willing to lose money on various ventures if they feel like they want to be involved in such ventures.
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Re: New Amazon Grocery Chain

Post by babs »

I know people at Amazon so my comments are based upon my conversations with them. Any physical retail they open is designed to ultimately drive their online business. The company has zero interest in becoming a major bricks and mortar retailer. Amazon views Whole Foods as a point of distribution for their home delivery service. The focus on these grocery stores will home delivery.
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