Amazon has confirmed it plans to launch a new supermarket grocery brand to help capture a larger piece of the $ 900 billion grocery market pie.
Two years ago Amazon (NASDAQ: AMZN / shares)
) made headlines when it bought Whole Foods Inc for an enormous $ 13.7 billion, but today's news means it's not a pleasure to sit down and be content with only high-end organic food.
Whole foods do not carry the most sweetened beverages, for example, or Lay potato chips, because the brand identity is that of organic good .. "whole" food. Works like fresh produce and organic meat.
However, Amazon is known for catering to customers who want a huge amount of variety, so in order to cater to a crowd of Walmart & Kroger customers who want something more basic with their usual assortment of groceries, the company is establishing a new kind of grocery store.
Despite the growing trend of grocery delivery, research suggests that more than two-thirds of shoppers still prefer to go to the store and choose their own food alone, and other researchers point to a geographical boundary for most consumers: 3 to 5 miles.
This is the distance most are willing to drive to grocery shopping and in order to secure a location close enough to more shoppers, Amazon needs to use more brick and mortar locations.
Amazon is always expanding and looking to new markets to continue driving its revenue growth (revenue), so it should come as no surprise that the company wants to use a new line of grocery stores, though this time with slightly reduced prices and more a typical grocery ticket.
Take a look at physical store sales numbers of which 95% + from its Whole Foods chain, revenue fell 1.3% to $ 4.19 billion in the third quarter of the previous year.
Los Angeles will be the recipient of the first new store somewhere in its suburban Woodland Hills neighborhood. At this time, Amazon has not announced the name of the new brand, but we know that it will open its doors to paying customers next year in 2020.
It's also worth noting that unlike Amazon Go sites, traditional cashier pay streams will be used, with a few additional self-checking style strips. If you live in Woodland Hills, California, you can already go and apply for a position at the new location.
Amazon shares closed down 0.8% today to $ 1,771. AMZN shares on the US market are up 15% on the YTD and are still slightly off their 52 week high of $ 2035.