Report: Amazon to Open its Own Chain of Grocery Stores

Amazon.com is planning to open a new grocery store chain in an effort to broaden its reach in the retail category, according to a Wall Street Journal report. Sources familiar with the project told WSJ that the online behemoth is planning to open dozens of grocery stores in several major U.S. cities, and the first store could open at the end of 2019 in Los Angeles. Additional talks are also under way for Amazon grocery stores in San Francisco, Seattle, Chicago, Washington, D.C. and Philadelphia, the people familiar with the matter said.

The grocery chain will be separate and distinct from Whole Foods, the grocer Amazon purchased in 2017 for $13.7 billion. According to the report, the new stores are expected to offer products at lower price points than many of those carried by Whole Foods. The report didn't confirm whether the stores would be branded "Amazon." The retailer is also pursuing an acquisition strategy to widen the new supermarket brand with eyes on regional grocery chains that have about a dozen operating stores, according to WSJ.

Total Retail's Take: While it's no secret that Amazon is interested in investing in the grocery vertical — besides its purchase of Whole Foods it also launched the Amazon Go cashierless store concept last year — Amazon-branded stores is a surprise to retail watchers. After all, sales at Amazon’s physical stores, which largely consist of Whole Foods, declined 3 percent in the fourth quarter from a year earlier, according to Bloomberg. However, Amazon appears not to be finished experimenting with grocery, and hey, when you're flush with cash, you're always in experimental mode.

So what does the news mean for grocery and other brick-and-mortar retailers? In short, Amazon will be an even more formidable omnichannel competitor. According to Sylvain Perrier, CEO and president of Mercatus, a digital commerce solutions provider, traditional grocers "can no longer rely on their physical footprint alone to differentiate themselves from the online juggernaut. Amazon grocery stores will certainly use their expansive shopper data to merge the in-store and online grocery experience, and given that Amazon has a way of making certain strategies the industry standard, grocers will be in trouble if they don't heavily invest in their digital practices and find effective ways to complement in-store and digital experiences."