BI Prime

Amazon is poised to disrupt grocers in

an entirely new way — here's what that
could look like
 Amazon will reemerge as a major force in grocery this year as it opens a new non-Whole
Foods grocery chain, rapidly expands its online pickup and delivery services, and adds
new Amazon Go stores.
 As the company looks to the future of the grocery business, one key executive says she
is "laser-focused on listening to customers and making their lives easier."
 "We are constantly being asked to juggle more tasks, all the while making it home in time
to feed ourselves (or our families) a nutritious meal," Stephenie Landry, Amazon's vice
president of grocery delivery, told Business Insider. "My job is 100% focused on making
sure customers can get a wide selection of high-quality, well-priced food delivered
quickly and for free."
 Visit Business Insider's homepage for more stories.

Amazon's purchase of Whole Foods in 2017 shook the grocery industry to its core, as
analysts and investors speculated about ways that the historically disruptive tech giant
could bring dominant rivals to their knees.

More than two years later, many of the more drastic predictions about Amazon's
impending grocery dominance haven't panned out. Amazon's share of the US grocery
market with Whole Foods has grown to just 2.2%, up from 1.7% in 2017, according to
UBS.

But Amazon could reemerge this year as a major force in grocery, as the company
prepares to open a new grocery chain after two years of learnings from Whole Foods,
while it also expands its cashierless Amazon Go technology and continues to grow its
popular delivery and pickup services.

Among the people leading those efforts is Stephenie Landry, Amazon's vice president of
grocery delivery. As she looks to the future of the grocery business, she is "laser-focused
on listening to customers and making their lives easier" and thinking about how
consumers' needs are changing, she told Business Insider.

"For example, millennials and Gen Zers are becoming parents, and their food buying
behavior is shifting to focusing on families," she said. "These generations have always
had access to the internet and mobile phones, there is an immediacy that has always
been at their fingertips, and it's created very high expectations. We work hard to meet
and exceed the bar."

Amazon shoppers' most pressing need right now is time, she said.
"We are constantly being asked to juggle more tasks, all the while making it home in
time to feed ourselves (or our families) a nutritious meal," she said. "My job is 100%
focused on making sure customers can get a wide selection of high-quality, well-priced
food delivered quickly and for free."

Amazon's mysterious new grocery chain will

open this year
Last year, Amazon rapidly expanded its delivery and pickup services and dropped the
$14.99 monthly Amazon Fresh membership fee for members of its Prime service, which
costs $119 annually.

Amazon customers can now get free two-hour grocery delivery or pickup through Whole
Foods or Amazon Fresh in 2,000 cities and towns, the company said.

"Customer response to grocery delivery – whether from Amazon Fresh or Whole Foods
Market – has been overwhelmingly positive," Landry said. "In fact, grocery delivery
orders from Amazon Fresh and Whole Foods Market more than doubled in the fourth
quarter year-over-year."

Amazon will continue investing in grocery delivery and pickup, Landry said.

But Amazon isn't only focused on online grocery, which is growing rapidly but still only
accounts for about 3% of all grocery purchases, according to UBS.

"The majority of customers still enjoy shopping in store, and that is where most food is
currently purchased," Landry said.

With its purchase of Whole Foods, which has 510 stores and 95,000 employees, Amazon
made a big bet on physical grocery stores. It's now leaning even harder into that bet with
the launch of its new grocery chain this year.

The company hasn't yet revealed much information about its new chain, besides
confirming that it won't be a Whole Foods store or feature Amazon Go technology.
Amazon Go uses cameras and artificial intelligence to allow shoppers to enter a store,
shop for products, and leave without exchanging payment.

The first location of Amazon's new chain will open in the Woodland Hills neighborhood
of Los Angeles this year. At about 35,000 square feet, the space is about the same size as
a Whole Foods store.

The new chain will reportedly carry conventional products, such as Coca-Cola and
Oreos, and target middle-income shoppers, according to the Wall Street Journal. It's
expected to compete directly with US grocery leaders such as Walmart, Kroger, and
Aldi.
The new chain could give Amazon access to a whole new set of customers — and
potential Prime members — as well as provide another pickup point for Amazon's online
grocery orders, which more than doubled in the most recent quarter year-over-year.

How Amazon's new chain could change

grocery shopping
There are many benefits for Amazon in building a grocery chain from scratch. The
company has a trove of data from customer orders through Amazon Fresh and Whole
Foods that should help it determine the best mix of top-selling items to carry in stores.

An essentially blank canvas also allows the company to allocate ample space to online
grocery services, such as order storage and pickup counters, which weren't factored in to
most US grocery store layouts until recent years.

Amazon is already building these spaces into new Whole Foods stores.

"New Whole Foods Market stores are designed with delivery and pickup orders in mind,
making extra space for delivery and pickup operations," Landry said.

Other traditional grocery chains, including Kroger and Walmart, have been reallocating
space or building new attachments to existing stores to account for their growing online
grocery businesses.

And while the Amazon Go technology won't be used in Amazon's first grocery store, it
could be added to future locations.

Amazon Go is now in 25 locations, most of which are about 2,500 square feet. The
company is currently testing the technology in a larger, 10,000-square-foot space in
Seattle.

Other technology that could be used in the new store includes "mixed format shopping,"
which would allow in-store shoppers to order household goods like paper towels from
an app while they shop for perishable food, as The New York Times
previously reported that Amazon had considered.

Amazon has also been working on technologies to make shopping easier in Whole Foods
stores.

"Innovations such as, the ability to ask Alexa if an item is in stock at select Whole Foods
Market locations and where they can find the item in the store... and Alexa Shopping
List features are ways to improve grocery shopping while in store," Landry said. "We
think about how to make the overall shopping experience, both offline and online, great
for customers who have different needs and priorities at different times."
The company has also started linked in-store purchases to customers' account to make it
easier to reorder items.

"One way we use technology to make the shopping experience even more convenient is
by surfacing in-store past purchases to customers shopping online," Landry said. "If a
Prime member scans their Prime QR code at checkout while shopping in store at Whole
Foods Market, we will surface those products to them online."

Regardless of whether Go or other technologies are part of Amazon's new store, the
chain — along with Amazon's many other grocery offerings — will likely make waves this
year.

Amazon has a strong track record of shaking up industries where it makes big
investments, and it's clearly placing big bets on grocery in 2020.