WSJ: Amazon to open new U.S. grocery chain separate from Whole Foods

A report from The Wall St. Journal today claims Amazon is preparing to open a new chain of grocery stores across the U.S. that won’t be associated with Whole Foods. The retailer is expected to open the first of these stores in L.A., possibly by the end of 2019, and has signed leases for at least two other locations opening next year, the report claims.

The stores will be separately operated from Whole Foods, but it’s not clear yet how they’ll be branded or even if they’ll carry the Amazon name. The longer-term plan involves opening “dozens” of these stores in major U.S. cities, and Amazon may even consider an acquisition strategy related to this goal which would see it pickup regional grocery chains with about a dozen stores under operation, the report said. It may also target retail space vacated by Kmart.

Other cities that could be seeing the new stores in the future include San Francisco, Seattle, Chicago, D.C., and Philadelphia.

The stores would carry a different product assortment than Whole Foods, including items at lower price points. They may carry a mix of groceries, health and beauty products, and would include a parking lot area for grocery pickup.

They’ll be smaller than a typical grocery store at 35,000 sq ft instead of the usual 60,000 sq ft, The WSJ said.

The news comes at a time when Amazon’s grocery delivery business is facing steep competition. Its rival Walmart has capitalized on its brick-and-mortar footprint and years of testing. Today, Walmart’s grocery pickup service is available at more than 2,100 locations and delivery is offered at nearly 800. It expects to offer pickup at 3,100 locations and delivery at 1,600 locations by the end of fiscal year 2020. The company even attributed its strong Q4 sales, in part, to the growing online grocery business.

Target, meanwhile, picked up same-day grocery delivery service Shipt for $550 million in 2017, and has been expanding its own drive-up, in-store pickup, and next-day delivery services to cater to shoppers’ other household needs.

Amazon also competes on grocery delivery with Instacart, Postmates, and services from other grocery chains.

However, its own grocery strategy is a bit mixed. In addition to Whole Foods, which offers grocery pickup and delivery in some locations, Amazon continues to offer delivery service through AmazonFresh, and in select markets, Prime Now.

Meanwhile, it’s simultaneously invested in cashierless, grab-and-go convenience stores, under the Amazon Go brand. For consumers, that means there’s not one single point of access for ordering groceries from Amazon, which can lead to confusion.

Reached for comment about The WSJ report, an Amazon spokesperson said the company doesn’t comment on rumors or speculation.

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