AMZN Stock – Amazon’s New Grocery Store Chain Is More Traditional Than It Looks
Hi all, it’s Matt Day. Before the pandemic changed the way we exercise, work and eat, the $900 billion U.S. grocery market was a digital laggard. Logistics explains a lot of this: Keeping a bunch of grapes chilled and undamaged in transit is hard. It’s also a matter of personal preference. Many people would rather eyeball and select their own tomatoes, thanks.
But in the great shift from the physical world to the digital one, few industries are as large or as potentially profitable at groceries. Over the last year, grocery delivery startup Instacart Inc. doubled its valuation twice—landing at $39 billion—and is now primed to go public. Uber Technologies Inc. also muscled into the category, and old-school retailers like Kroger Co. have finally figured out how to cater to online shoppers with delivery and pickup options.
While online sales still make up less than 10% of total grocery orders, researcher EMarketer estimates that digital sales rose about 54% in 2020, and will top $100 billion for the first time this year.
Amazon.com Inc.’s answer to the mixing of offline and online food shopping is its relatively quiet brand, Amazon Fresh, which has tightly integrated digital ordering into physical shops. We recently profiled the company’s new line of Fresh grocery stores, which have been popping up in southern California and Illinois, but seem poised to go coast-to-coast in short order.
At Amazon Fresh stores, professional shoppers in branded shirts roam the aisles grabbing items for customers, who can pick them up from a dedicated window. The headline flourish is the company’s carts, called Dash carts, which come with cameras that can automatically tally what you put into them. Skip the checkout line!
But the system is not perfect. Customers have to remove their bags from the cart before venturing out into the parking lot, thereby eliminating the risk of theft or a pricey cart getting flattened by an SUV. And so far, Dash carts are limited to shoppers who are making smaller purchases. Elsewhere, the company is testing whether it can bring the people-tracking system of cameras that power its cashier-less Amazon Go convenience stores to a larger grocery format, where competition is steep. Kroger, Walmart Inc. and regional chains like Giant Eagle are all also experimenting with smart carts or other cashier-less systems.
The most futuristic in-store technology, call it Self-Checkout 2.0, isn’t mature. It will likely be years before such systems are widespread, and it’s unclear whether customers will go out of their way to avoid a few minutes’ wait in line. Adding hundreds of thousands or millions of dollars in servers and cameras isn’t a sure bet in an industry famous for paltry margins and fierce competition.
For all the bells and whistles now in development at grocers, the food business remains predicated on basics. To paraphrase a Jeff Bezos maxim: Wide selection, low prices and convenience are features that are likely to last beyond technology fads. Surveys show shoppers rarely travel far for groceries if they can help it, and many people aren’t ready to make the leap to fully digital grocery buying.
In that sense, Amazon Fresh, which has already peppered stores across its first market, the Los Angeles area, is a grocery industry throwback, rather than a bold step forward—and a bet that old habits are going to die hard. People may still be getting their tomatoes in person for a while to come. —Matt Day
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Just call him “Technoking.”