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Amazon Fresh: E-Commerce Giant Opens Its First Self-Named Grocery Store

Aug 28, 2020 by Marc Rapport
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Amazon (NASDAQ: AMZN), the 800-pound gorilla of e-commerce, the one company that gets pointed at the most for the decline of brick-and-mortar shopping and the whammy that’s put on commercial retail real estate everywhere, has opened its first shop-in-person grocery store under its own name.

The first Amazon Fresh grocery store opened yesterday in the Los Angeles suburb of Woodland Hills. Or more specifically, it threw open its doors to shoppers, one could say, if you’re on the right list.

"Starting today, we’re sending invites to select customers in Woodland Hills, California, to shop the store before it opens widely to the public -- just bring the emailed invitation to shop," Jeff Helbling, vice president of Amazon Fresh Stores, said in a blog.

Amazon’s massive warehousing and distribution operations have already been touted as possible tenants for abandoned mall space. Could this new store be a harbinger of the company’s expanding role as an occupant of shopping space, too?

In-person grocery shopping, with some digital flair

Unlike 24/7/365 digital shopping, the Amazon Fresh grocery store has physical grocery store hours: daily from 7 a.m. to 10 p.m. PST.

But this is no typical convenience store. Being Amazon, there are lots of high-tech touches, including the launch of a new feature called the Dash Cart that lets you use Alexa, for instance, to create a shopping list in advance and then be guided around the store to those items, and then have a cashierless checkout experience instead of a checkout line. Echo devices also will be on hand to offer up advice on the spot.

Those who don’t want to do the grocery dive in person can use their Amazon account and Prime membership to order on the Amazon app and get free delivery.

The stores will offer a mix of national and Amazon-branded products. Stores is plural here, because the e-commerce giant confirmed to TechCrunch it plans to open three Amazon Fresh stores around Chicago (in Oak Lawn, Schaumburg, and Naperville) and two more Southern California locations (in North Hollywood and North Irvine) to join the inaugural shop in the Woodland Hills neighborhood. No timeline was given.

Moving beyond Whole Foods into a retail space of its own

So what does this mean to the commercial real estate business? Amazon already has some Amazon Go stores here and there -- including in its hometown of Seattle. More notably, Amazon is the owner of Whole Foods, which has about 450 locations across the country.

But those are different animals. As the TechCrunch blog says, "While Whole Foods focuses mainly on organic and health foods (and has rightly earned the nickname 'Whole Paycheck' because of how expensive a shopping trip can be there), and Go is smaller and about catering to early adopters with its automated AI and camera approach for checking out, Amazon Fresh will bring in a bunch of recognized, mainstream big brands alongside Amazon’s own burgeoning own-label lines," along with a lot of preprepared foods.

That same report also says Amazon has been "slowly picking up large retail locations to develop them into Fresh depots for a while now, including sites in L.A., but a number of other signals, including hiring patterns, have led many to guess that the bigger plan was to build them into retail operations."

Reaching deep for the recession-proof space

So, this commitment to brick-and-mortar means Amazon is ready to take on the competition all along the supply line as it continues to strive to serve the ready customer wherever and whenever it can.

Of course, grocery stores anchor thousands of shopping centers and -- along with successful convenience stores in smaller strip malls -- are among the most recession-resistant clients a real estate investment trust (REIT) and other operators can have.

Grocery store chains have largely not been among the retailers shutting down or reorganizing through bankruptcy. Indeed, one low-cost competitor -- Lidl -- just announced this week it plans to open 50 new stores by the end of 2021, adding to the 103 it currently operates in nine states in the mid-Atlantic and Northeast.

But Amazon’s major competition here, besides Kroger (NYSE: KR), Albertsons (NYSE: ACI), Publix, and Costco (NASDAQ: COST), would appear to be Walmart (NYSE: WMT). Its grocery business accounted for 56% of the $341 billion in net sales recorded at its 4,756 U.S. stores in 2019, and it has about a quarter of the U.S. grocery store business to itself. In addition, Walmart widely offers online ordering, pickup, and delivery itself.

The bottom line

The moral of the story: Physical stores are not being replaced by digital delivery options, certainly not enough to envision anytime soon a scenario where most of us do our supermarket thing solely on an Amazon app or any other app.

Makes sense. For many shoppers, thumping a watermelon online just doesn’t ring true.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Marc Rapport owns shares of Amazon. The Motley Fool owns shares of and recommends Amazon. The Motley Fool recommends Costco Wholesale and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.