Coverage: Amazon opens its first grocery store, plans more

Amazon.com Inc. unveiled Monday its first small-format grocery store, Amazon Go, one of at least three brick-and-mortar formats the online retail giant is exploring to continue its growth.

Laura Stevens and Khadeeja Safdar of The Wall Street Journal have the news:

Two of the other store formats Amazon is considering are bigger than the convenience-style Go store, according to people familiar with the matter. In November, Amazon’s technology team approved a proposal to open large, multifunction stores with curbside pickup capability, clearing the way to start hiring and planning, according to one of the people.

Two drive-through prototype locations, which don’t offer an in-store shopping option, are also slated to open within the next few weeks in Seattle, the people said.

Amazon envisions opening more than 2,000 brick-and-mortar grocery stores under its name, depending on the success of the new test locations, according to the people. By comparison, Kroger Co.operates about 2,800 locations across 35 states.

Adding grocery pickups will be “part of their secret sauce in terms of all of the different ways in which they can engage the customer in bringing the product to them,” says Bill Bishop, chief architect at grocery and retail consultancy Brick Meets Click. “Everyone is looking at grocery because of frequency. Frequency guarantees that you have density.”

Narottam Medhora and Jeffrey Dastin of Reuters note that the store has no checkout lines:

Amazon Go, the online shopping company’s new 1,800-square-foot (167-square-meter) store, uses sensors to detect what items shoppers have picked off the shelves and sends a bill to their Amazon accounts if they do not replace them.

The store marks Amazon’s latest push into groceries, one of the biggest retail categories it has yet to master. The company currently delivers produce and groceries to homes through its AmazonFresh service.

“It’s a great recognition that their e-commerce model doesn’t work for every product,” said analyst Jan Dawson of Jackdaw Research, noting that physical stores would complement AmazonFresh.

“If there were hundreds of these stores around the country, it would be a huge threat” to supermarket chains, he said.

The S&P 1500 food retail index, which includes Kroger Co, Whole Foods Market Inc and other companies, was down 0.5 percent at the close. Shares of Amazon closed up about 2.6 percent.

Angel Gonzalez of the Seattle Times reports that the stores, if successful, could overhaul retail employment:

In the much longer term, if the experiment works out and is adopted widely, it could radically transform the nature of work in the retail industry, much like driverless car and truck technology threatens to upend transportation.

The Bureau of Labor Statistics says that cashiers were the second-largest occupation, with 3.5 million employed in the U.S.

Analysts with Cowen say the move shows how aggressively Amazon is pursuing the grocery business, which represents about 17 percent of total U.S. retail, or nearly $800 billion. It’s an area dominated by Wal-Mart, an Amazon rival that is revving up its e-commerce game. For Amazon, it represents a huge source of potential revenue growth, plus another way to ensconce itself in people’s shopping habits.

While more and more people, especially among the younger cohorts, are going online for their groceries, “we acknowledge some people may never be comfortable with the idea,” say the Cowen analysts.