Amazon may be be taking steps to move its grocery business into new territory: drive-up grocery hubs, which would give it a new slice of the highly competitive, $800 billion grocery market.
Planning documents and local business-news outlets point to three possible locations for the “click and collect” sites: San Carlos and Sunnyvale, Calif., as well as Amazon’s hometown of Seattle.
The new locations would allow customers to buy online and then pick up the groceries, eliminating the need for Amazon to deliver perishable items. They would complement Amazon’s current grocery offerings, Amazon Fresh and Prime Now.
“It’s very appealing. You can shop at home or at your desk, and then on the way home from work or picking up the kids you just swing by and they bring you out your groceries,” Phil Lempert, a food marketing expert based in Los Angeles, who did not have direct knowledge of Amazon’s plans.
A spokesperson for Amazon declined to comment.
The plans are cloaked in mystery, not unusual for Amazon and other tech giants as they test new initiatives.
In California, a project developer has proposed a 11,600 square-foot Internet retail grocery store on a commercial property site, according to Jennifer Garnett, a communications officer for the city of Sunnyvale.
The Silicon Valley Business Journal, citing planning and loan documents, said Amazon is the retailer behind this location and a similar, proposed, grocery delivery pick-up center in San Carlos, Calif.
In Seattle, the city in May approved a permit for an unnamed company to establish a mixed-use structure in the city’s Ballard neighborhood, a favorite for tech workers, according to planning documents reviewed by USA TODAY.
Tech website Geekwire said the company behind “Project X” was likely Amazon: it’s using the same architect that Amazon used for its Prime Now delivery hub in Seattle, and the same language found in planning documents for the two Silicon Valley grocery pick-up locations.
To use the proposed Seattle location, customers would schedule a 15-minute to 2-hour pick-up window, then drive to a designated parking area to pick up purchased items or walk into a retail area to pick up items, said Geekwire, citing the planning documents.
Amazon has been trying to master the low-margin but high-engagement grocery business. If it expands, it could further lock customers into its ecosystem pegged to its Prime subscription membership.
It’s already tested the business with two services where it takes care of the delivery: the company’s Amazon Fresh offers full-service grocery delivery in Seattle, southern and northern California and New York City. Its Prime Now, a two-hour delivery for more limited grocery items, is available in 25 markets in the United States.
That’s a different model from the possible “click and collect” sites, which are already popular via other retailers in Europe and the United Kingdom, said Michelle Beeson, a retail commerce analyst with Forrester based in London.
Getting Americans to buy their groceries from Amazon would tie younger consumers to the company and give the data-voracious tech company even more insight into households.
Amazon currently has about 1% of the $795 billion U.S. food and beverage market, a number that’s expected to grow, said John Blackledge with Cowen and Co., a financial analysis firm.
Younger consumers are much more comfortable buying everything, including groceries, online. Twenty-one percent of U.S. residents between 25 and 34 bought groceries online in February, a Cowen survey found.
“It’s a gateway. American shop for groceries five times a month on average,” said Blackledge. “Getting people engaged on their platform is huge,” Blackledge said.
Even if delivering groceries isn’t as high a revenue proposition as electronics or other more typical Amazon goods, the information the company gathers from each sale is priceless because food purchases tell a remarkable about about a household.
“If I home in on the foods you buy, it starts telling me how many people are in your family, how old they are, if there are any health concerns, even your ethnic taste buds,” Lempert said.
Source: USA Today