Amazon Food Stores Wouldn't Disrupt The Grocery Business

The Lempert Report
December 02, 2016

In fact, they might not even succeed.

The unconfirmed reports that Amazon is planning to build 2,000 food stores within ten years here in the U.S., beginning with a pilot program of 20 stores by the end of 2018, has the grocery industry in a tizzy. The stores will reportedly be under the Amazon Fresh banner and will be tested in two formats – a more traditional store with shelves and shopping carts and one which is “click & collect” where you order beforehand (or in-store on a kiosk) and just pick up.

Business Insider reported the plan based on documents they obtained including that the pickup locations would be 10,000 square feet and the more traditional format would be 30,000 square foot. The plan reportedly includes using cutting edge technology like AR to read a customer’s license plate as they enter the area to speed up their curbside delivery. 

I’m not sure that if Amazon does follow this plan that it will be as disruptive and game changing as many predict. I see it a bit more iffy. I’m afraid that Amazon may well be looking at the past iterations of grocery shopping with a few technology whiz-bangs rather than looking to the future, as they try to fill in a niche between two already successful formats that are on the cutting edge that are taking the lead with “food” not convenience or technology.

Millennials and Generation Z take technology for granted, they are leading the food trends, and they are, in everything from sustainability, trace-ability, social responsibility as well as unique and different culinary creations. They want a total food experience and are demanding that from retailers. For them technology is just a tool to achieve that, not the raison d’être. 

First of all, convenience stores have evolved. Greatly. And one of their keys to success is their foodservice offerings.  The other missing piece is in-store dining, or grocerants, which is one of the biggest trends in grocery which according to the 2016 Technomic report are topping nine percent and expected to sustain a similar pace over the next ten years .

Then there is the elephants in the room – Aldi and Lidl. European retailers with a smaller footprint that carefully curate their private brands to offer high quality, low prices and bare-boned store environments. 

What opportunity do these leave Amazon? Certainly the reports that their stores will only be available to those who have paid the additional fees for Amazon Prime and Amazon Fresh will be a turn off to Millennials unless they take a significant turn and drastically reduce their food and beverage pricing, which as an Amazon Fresh user I can share are not lower than I can find at a nearby supermarket.

Amazon may well have an uphill battle unless these plans are mistaken, or they make some changes pretty quickly.