Amazon eyes 2,000 new retail groceries within the decade.

Amazon Is Planning to Open Grocery Stores. Would You Pay to Shop at One?

Amazon Is Planning to Open Grocery Stores. Would You Pay to Shop at One?

Moneybox
A blog about business and economics.
Oct. 27 2016 12:15 PM

Amazon Is Planning to Open Grocery Stores. Would You Pay to Shop at One?

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Amazon rose to power by convincing customers to abandon brick-and-mortar shopping. Now it’s opening shops of its own.

Henry Grabar Henry Grabar

Henry Grabar is a staff writer for Slate’s Moneybox.

According to a new report from Business Insider, Amazon plans to open 20 grocery stores in the next two years. Over the next decade, the company thinks there’s room to expand to as many as 2,000 locations, which would make Amazon the fourth-largest U.S. grocer by locations, behind Walmart, Kroger, and Albertsons.

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The Seattle-based company has been experimenting with selling groceries for 10 years, and has relatively little to show for it. Its e-commerce rival Walmart, meanwhile, accounts for nearly 20 percent of U.S. grocery spending and has used its large retail footprint to combine online orders with in-person pick-ups and personalized shoppers.

The grocery rollout is the latest step in Amazon’s reluctant embrace of the immutable constraints of geography. The company has moved from tax-free, rural distribution mega-centers to warehouses closer to consumers. Earlier this year, CEO Jeff Bezos said he wanted to open 300 to 400 bookstores (there’s one in Seattle already); the company is also opening dozens of pop-up stores to showcase its own products, like the Echo.

And now groceries. Earlier this month, the Wall Street Journal reported that Amazon would open “convenience stores” for sales of milk, produce, and dairy. Consumers could make quick pick-ups at the drive-in locations, which would be equipped with license plate–reading technology. The stores would be open only to subscribers of Amazon’s Fresh service, which costs $15 a month, per the Journal.

The stores that Business Insider learned about will be divided between traditional grocery stores and “click-and-collect” drive-ins. In August, Geekwire appeared to discover the latter type of store under construction in Seattle. According to city planning documents, it would work like this:

When placing an online order, customers will schedule a specific 15-minute to two-hour pick up window. Peak time slots will sell out, which will help manage traffic flow within the customer parking adjacent to the building. When picking up purchased items, customers can either drive into a designated parking area with eight parking stalls where the purchased items will be delivered to their cars or they can walk into the retail area to pick up their items. Customers will also be able to walk into the retail room to place orders on a tablet. Walk in customers will have their products delivered to them in the retail room.
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In other words, a highly programmed experience where even parking spaces must be reserved in advance. That suggests Amazon may limit the grocery experience to members, whose monthly or annual buy-in would encourage loyalty to the service. (That’s the plan, at least to begin with, according to the Journal.) It’s worked for Amazon Prime. It's worked for Costco. Why not for groceries?

One reason: Americans are treating grocery shopping as less of a rote experience than it used to be. Over the past 50 years, grocery shopping has been a one-shopper, one-store experience. But that model is cracking, as consumers cherry-pick between traditional grocery stores, Walmart, and—especially in the urban markets where Amazon wants to compete—organic, ethnic, or specialty shops.

According to the Food Marketing Institute, the percentage of Americans with a supermarket as their “primary store” has fallen from 67 percent, in 2005, to 49 percent this year. That kind of channel surfing might suggest that consumers wouldn’t want to shack up with one retailer with a monthly membership fee.

Or, it could indicate that Americans shop around because nothing quite meets their needs. Can the “everything store” sate that shopping wanderlust?