Amazon confirms plans to open a new grocery brand

Amazon said it plans to open its first new brand of grocery store in California next year, as it amps up its ambitious push to become a bigger name in food.

“Amazon is opening a grocery store in Woodland Hills in 2020,” an Amazon spokesperson confirmed to CNET, soon after the company published four new jobs postings for the location. Woodland Hills is a neighborhood in Los Angeles.

The store will be different from Amazon-owned Whole Foods, the company said. It didn’t say whether it will open more of these locations, what its selection or pricing will be, or what the brand name is. But in the jobs postings, the company described the Woodland Hills location as “Amazon’s first grocery store,” suggesting that it will have the Amazon brand name and that the company could expand to multiple sites.

The store won’t use the company’s Amazon Go technology, which allows customers to check out without waiting in line. Instead, checkout will be conventional as at other grocery stores, the company said.

In addition to Whole Foods, which Amazon bought for $13.2 billion in 2017 and has over 500 stores, the company offers grocery delivery through Amazon Fresh, the main Amazon website and Prime Now, as well as food at Amazon Go.

The Wall Street Journal in March wrote about the existence of Amazon’s new grocery store format, which the company hadn’t confirmed until this week. Last month, the publication said Amazon was already working on additional stores in Los Angeles, Chicago and Philadelphia.

The new store, though with only one confirmed location so far, points to Amazon’s growing ambition in the roughly $800 billion US grocery market, where rival Walmart is the leader and Amazon, even after its Whole Foods deal, remains a small player. Expanding in the grocery sector helps Amazon, the world’s largest online retailer, in a number of ways: It reinforces customer loyalty because people tend to shop at a local store every week and it could allow the company to continue its fast revenue growth, which typically hovers around 20% every quarter despite its massive size.

Additionally, the new line could let Amazon move into the more mainstream grocery store business, while maintaining Whole Foods as a higher-end store for organic and specialty foods. This work could offer new competition to KrogerSuperValu and many other supermarket chains.

While Amazon is known for skillfully pushing into new markets, the new store comes with lots of risk. Several of Amazon’s other physical store lines, including Amazon Go and Amazon Books, aren’t yet huge moneymakers. It’s also shuttered its line of mall kiosks, which sold Amazon devices and smart-home gear. Plus, the company would have to spend years building out a new chain of stores then bank on people switching their weekly habits to go to them. Added to that, the grocery business offers razor-thin margins, so there’s little wiggle room for Amazon to lower prices while still trying to bring in a profit.

Amazon posted job openings for a store lead, grocery associates and food service associates at the Woodland Hills store. The store has been reported to be a former Toys R Us that’s about 35,000 square feet in size.

When asked if the new stores will compete against Whole Foods or signal a move away from investing in that brand, Amazon said no, offering strong support for continuing to grow that business.

“When it comes to grocery shopping, we know customers love choice, and this new store offers another grocery option that’s distinct from Whole Foods Market, which continues to grow and remain the leader in quality natural and organic food,” the Amazon spokesperson said, noting that Whole Foods opened 17 locations this year and that more are planned. The spokesperson said Amazon will continue to invest in grocery delivery with Whole Foods.

In another sign of Amazon’s growing interest in the grocery business, the company last month did away with its $14.99 monthly fee for Amazon Fresh grocery delivery. The change undercuts rival Walmart’s new Delivery Unlimited program, which costs $12.95 a month and was just introduced in September.


Whole Foods to test robot barista

Whole Foods Market will install a robotic barista to provide in-store coffee service at its new Houston-Midtown location through a partnership with Austin-based Briggo, according to a press release.

After launching in 2018, Briggo is making its grocery store debut with Whole Foods, offering a novel concept for the retailer and its customers in one of its newest stores.

Briggo’s order-ahead app promises to shave time off shoppers’ morning coffee runs, while digital kiosks address efficiency and customer experience in-store. Restaurant chains across the U.S. have added ordering kiosks in recent years, so the technology shouldn’t be a leap for shoppers to use. Customers can also purchase packaged Briggo coffee to brew at home, which will be available at the Houston-Midtown store or online.

The novelty of the robotic barista may draw curious coffee drinkers in the short-term and could drive a sales bump as the new Houston store gets going. Long-term, the retailer will need to see sustained sales and labor savings to justify expansion to other stores.

Grocers are applying this same cost-savings assessment to other automated technologies flooding the industry, from shelf-scanning bots to micro-fulfillment.

Whole Foods is widely known for its in-store coffee service. The retailer has a full-service espresso and coffee bar at many locations and a Capital Commons cafe in its flagship Atlanta store, all of which sell its house Allegro brand. Its Lincoln Harbor, New Jersey, location is slated to have an outpost of the Brooklyn-based coffee shop Cafe Grumpy.

The U.S. coffee market has increased in volume by 3.8% in 2018, according to Allegra World Coffee Portal’s 2019 Project Cafe USA report. Allegra conducted a survey and found that the U.S. coffee shop market grew to a valuation of $45.5 billion last year, but the industry faces issues with labor costs and increased competition.

The store is set to open Nov. 7.


Kroger is testing 30-minute delivery

With Kroger Rush, the experiment-happy retailer seeks to win over customers looking for a quick meal or a few last-minute ingredients to round out a dish they’re preparing at home. The service is part of Kroger’s effort to cover a wide range of online shopping demands, and joins its pickup and delivery options along with Kroger Ship, the direct-to-consumer marketplace that launched last year. Altogether, these services will make Kroger products available to every American household by the end of this year.

As the threat from restaurant delivery services like Grubhub and Uber Eats grows, grocers are trying to respond. Some, like Wegmans and Publix, offer dedicated meal delivery, but the speed, brand appeal and quality popular restaurants are delivering at lunch and dinner is tough to match.

If Kroger Rush scales, it will likely need to do so in population-dense areas close to young, tech-savvy consumers. The company will also have to sort out labor. Is it more cost-effective to rely on a third-party company like Instacart or does Kroger need to use its own employees?

The service calls to mind FoodKick, the on-demand offering from New York-based e-grocer FreshDirect that caters to a young, affluent audience. FoodKick launched in 2016 and centers on alcohol, fresh foods and meals for Big Apple consumers.

Kroger Rush also draws a comparison to Ocado Zoom, the on-demand delivery option Kroger’s British e-commerce partner launched earlier this year in London. Zoom — a nimble alternative to the next-day service Ocado provides from its large automated warehouses — offers around 10,000 products and is focused on small- and medium-sized orders.

Depending on how demand evolves, Kroger and Ocado could very well combine their knowledge and resources for super-fast delivery in the U.S. A Kroger spokeswoman acknowledged as much to the Business Courier, noting “maybe Ocado robots will do the picking for a (Kroger) Rush solution.”

That solution is still a ways off, however, as the two companies just broke ground on their first fulfillment center — a $55 million, 335,000-square-foot facility in Monroe, Ohio, set to open in spring 2021.

Ever since it launched its Restock program, Kroger has shown an eagerness to experiment and explore alternative revenue streams. But the company’s core grocery business remains under pressure, and executives have placed significant emphasis on becoming an e-commerce leader in the future.

A progress report will come this Thursday when Kroger reports its first-quarter earnings for fiscal 2019.