Amazon Confirms Plans To Roll Out New Grocery Store Brand
Amazon has confirmed that it plans on launching a new supermarket grocery store brand to help capture a larger piece of the $900 billion domestic grocery market pie.
Two years ago Amazon (NASDAQ: AMZN/stock]) made headlines when it purchased Whole Foods Inc for the hefty sum of $13.7 billion, yet today's news means that it isn't content to sit by and be content with just high end organic food.
Whole Foods doesn't carry most sugary soft drinks, for instance, or Lay's potato chips since the brand's identiy is that of organic well.. "whole" foods. Things like fresh produce and organic meats.
However Amazon is known for catering to customers who want a massive amount of variety, so in order to cater to the "Walmart and Kroger" crowd of shoppers who want something more basic with the usual assortment of grocery items the company is establishing a new kind of grocery store.
Despite the growing trend of delivery groceries, research suggests that more than two thirds of shoppers still prefer to go to the store and pick out their own food on their own, and other researhc points to a geographic limit for most consumers: 3 to 5 miles.
That is the distance most are willing to drive to buy groceries and in order to provide a locale close enough to more shoppers Amazon needs to roll out more brick and mortar locations.
Amazon is always expanding and looking to new markets to continue to drive its topline (revenue) growth rate, so it should come as no surprise that the company wants to roll out a new line of grocery stores, albeit this time with slightly reduced pricing and more typical grocery store fare.
Take a look at its physical stores sales numbers, 95%+ of which comes from its Whole Foods chain, revenue was down 1.3% to $4.19 billion in the third quarter from the previous year.
Los Angeles will be the recipient of the very first new store somewhere in its Woodland Hills suburban neighborhood. At this time Amazon hasn't released the name of the new brand, but we do know that it will open its doors to paying customers next year in 2020.
Also worth mentioning is that unlike the company's Amazon Go outposts, traditional cashier checkout lanes will be used, with some supplemental self-check out style lanes. If you live in Woodland Hills, California, you may already go and apply for a position at the new location.
Shares of Amazon closed slighty down 0.8% today to $1,771. $AMZN stock is up 15% YTD and is still a bit off from its 52 week high of $2035.