Amazon is looking at ways to increase its brick-and-mortar grocery sales with a new delivery platform that could compete with the networks of Walmart, Target and Kroger.
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The online sales juggernaut wants to combine fulfillment networks for its Whole Foods Market business and Amazon Fresh stores into a single delivery platform that could become the go-to resource for consumers’ supermarket needs, The Wall Street Journal reported.
Amazon’s $13.7B acquisition of Whole Foods in 2017 was followed by the launch of Amazon Fresh in 2020. The latter now has 60 locations across the country.
The move comes as Amazon has struggled to find firm footing in the U.S. grocery market, which generated an estimated $1.5T in sales last year. Meanwhile, the percentage of groceries bought online nearly doubled from 2019 to 2020 and has continued to grow since, according to data from Bain & Co. That total surpassed 10% for the first time in 2023.
Walmart, which claims the largest share of U.S. grocery sales, has around 4,600 stores across the country. The retailer has made a robust effort to ramp up online sales, announcing in August that business had grown faster than in-person sales.
Walmart’s existing stores have effectively become distribution centers as many of the company’s online orders are fulfilled there, which allows it to capture sales to higher-income customers, grocery research firm Brick Meets Click partner David Bishop told the WSJ.
Other large grocery chains have followed suit, prompting Amazon's foray into the new platform. The company is testing offering same-day grocery deliveries in Phoenix and will set up a microfulfillment center at a Whole Foods store in Plymouth Meeting, Pennsylvania.
“They haven’t demonstrated a track record of success in the physical world,” Bishop told the WSJ of Amazon's grocery performance.
Earlier this year, Amazon announced plans for smaller-format Whole Foods stores and an effort to double the number of its same-day delivery distribution hubs.
As part of its order fulfillment process revamp, the e-commerce giant plans to add to the 26 Amazon Fresh fulfillment centers it currently uses to fulfill delivery orders for Whole Foods products and common household goods.
Amazon started an unlimited grocery-delivery subscription to U.S. customers earlier this year, but it also shuttered at least five of its grocery warehouses. The former executive in charge of its grocery division, Tony Hoggett, left Amazon last month to become chief operating officer of restaurant delivery startup Wonder.
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