After much buildup and press since the start of 2020, Amazon AMZN +0.9%’s new grocery concept in Woodland Hills, California is finally here. The new store — dubbed Amazon Fresh AMZN +0.9% — has already opened to “a select group of invited customers,” and Amazon says that it will soon open the store “widely to the public in the coming weeks.”
On the surface, the store concept doesn’t read like much. There is hot food, like made-to-order pizzas, rotisserie chicken, and fresh-baked bread. There are shelves stocked with cool sounding Amazon private label brands, like Fresh and Cursive. And, there is even a 5% cash back reward for customers who “use their Amazon Prime Rewards Visa Signature Card or Amazon Prime Store Card at checkout.” For all intents and purposes, the store sounds like another garden variety grocery store.
But, au contraire mon frère — Amazon Fresh is anything but ordinary.
Read Amazon’s company blog post closely and there are four subtle but important innovations within the store that the average in-store shopper may not even notice but could change the grocery retailing landscape forever.
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#1 — Package pick-up and free package-less product returns
Amazon is the everything store. The average Albertsons, Safeway, Kroger KR +3.4%, etc. is not. They are, at best, just grocery stores. Amazon Fresh, unlike its grocery store brethren, is therefore just one tool within Amazon’s toolbox, not the entire toolbox itself.
This distinction is important because it means that Amazon Fresh can serve as a hub for other Amazon customer activities outside of grocery shopping — namely, returns and package pickup of wares that have nothing to do with grocery stores. Kroger and Safeway cannot do that with their stores. Customers cannot take online electronics back to a Kroger or online apparel back to a Safeway, for example.
The closest competitors that offer something similar to this right now are the mass merchants like Walmart WMT +0.1% and Target TGT -0.5%, but, keep in mind, their third-party marketplaces and assortment offerings also still pale in comparison to Amazon.
Amazon is instead doing something quite unique. It is almost like Amazon is creating a “faux one-stop shop” (my quotes) for everything a general merchandise store would carry but doing it by way of digital connection points and smartly placed counters and curbside services in and out in front of a grocery store. It’s like doing Target or Walmart without having to physically inventory all the other product categories inside of a store itself.
A traditional grocer’s only competitive response will be either to allow Amazon into its walls (similar to Kohl’s KSS +1.1%) or to partner with third-party services that operate return hubs for online purveyors not named Amazon. In the former, Amazon still wins, while in the latter, one has to wonder if the use case is broad enough in its appeal to make a difference, and especially when one considers the next point.