Amazon.com (AMZN +0.98%) is not about to level the playing field between it and Walmart (WMT 3.51%), Target (TGT +0.37%), and other mass retailers, it's going to upend the field -- just as it did with e-commerce. This time, the online retailer is looking to start a pickup service at Whole Foods Market.
Since purchasing the organic grocer last summer, Amazon has sought to energize the supermarket chain by slashing prices and offering delivery services. None of that has been particularly novel, though, because the competition also offers similar services and competitive prices.
Image source: Whole Foods Market.
In fact, it's one of the ways Walmart has managed to keep pace with Amazon: Along with its "everyday low price" policy, many of its more than 5,000 U.S. stores pull double duty as distribution centers where items ordered online can be picked up in-store or shipped to the customer's doorstep. Target has also picked up its delivery game by purchasing grocery delivery start-up Shipt for $550 million while expanding its click-and-collect program to around 1,000 stores.
So what's truly revolutionary with Amazon's in-store pickup announcement is that it wants to use the Whole Foods stores as a pickup location for third-party retailers.
Expanding the reach of pickup
In a job listing looking for a finance manager to help launch "the Whole Foods delivery and pick-up service on the ultra-fast Prime Now app," Amazon also revealed that it was considering extending the service to enable our Prime customers to shop from a group of "marquee third-party retailers."
Although it's not clear just who these third-party retailers might be, it may vastly alter the "buy online, pickup in-store" dynamic that other retailers tout because it could dramatically extend the utility of shopping on Amazon.com.
The e-commerce king's third-party sellers are a diverse group, ranging from individuals who have set up a storefront on the site to national chains like Nike and even Sears Holdings.
It's also a reversal of the ploy Amazon used when it began installing its lockers in retail locations. Staples and RadioShack were early test subjects of the project, hoping to boost store traffic, but quickly realized all they were doing was undermining their own sales. Recently shopping malls began installing them, but again it's a move that undercuts their tenants.
By using Whole Foods as a pickup location, Amazon also benefits by greatly expanding the number of potential customers entering the organic grocery store.
Save on shipping costs
Amazon has proved it can move customers when it wants to. When it announced price cuts at Whole Foods last September, Amazon saw a 33% surge in customer foot traffic in just the first week at its stores. Continuously driving new ways to bring in more customers should result in higher sales and profits.
Amazon recently began offering two-hour grocery delivery from Whole Foods through its Prime Now app in four markets, but plans to roll out the service to more regions this year, and possibly companywide thereafter.
It might also cut down on its own shipping costs, which have nearly doubled from $11.5 billion in 2015 to $21.7 billion last year.
The bottleneck, of course, is that Amazon has less than 10% of the store count that Walmart does, and the retail behemoth just said it was going to boost delivery from six markets to 100 by the end of this year. Whole Foods is also dwarfed by Kroger, which operates 2,800 stores, and by Target's 1,800 locations.
It could also be why Amazon was reportedly interested in buying some of Toys R Us' locations. The bankrupt toy seller is liquidating its merchandise and shutting down all its 800 or so U.S. stores. Amazon doesn't want to keep the brand alive, but rather use the spaces for its own purposes, which could very well be more pickup locations for merchandise.
The delivery job listing has since been deleted, but it's clear Amazon.com is planning to revolutionize the e-commerce industry once again.
