Amazon to launch second grocery store business
Amazon has plans to open a different brand of grocery stores, according to The Wall Street Journal, citing unnamed sources.
The new chain has plans to open in Los Angeles as early as the end of 2019, and it’s signed leases for two more locations that would open in early 2020. The stores are said to offer a wider array of products and lower price points compared to Whole Foods. Amazon is also considering acquiring regional grocery chains that have approximately 12 stores, which would speed up its expansion, and it’s in additional talks to open stores in shopping centers in five different U.S. cities.
More grocery stores gives Amazon an important source of household data and shopping frequency, reported Morgan Stanley analyst Brian Nowak in a Yahoo Finance article. Success in grocery, said Nowak, brings Amazon a greater market share of trade spend budgets that could boost the company’s surging advertising business. And finally, the stores could help propel sales of Amazon’s high-margin private label goods and spur more Amazon Prime accounts.
Grocery-anchored retail is one of the most stable types of retail as they serve consumers on a daily basis and have proven more Internet-resilient than other retail sectors. Grocery-anchored retail has maintained low cap rates and increasing prices.
But openings of new grocery stores fell 28.8 percent year-over-year in 2017, reported JLL’s Grocery Tracker 2018 report. More than a third of new grocery store openings were in just three states: California, North Carolina and Virginia. Meanwhile, investment into grocery-anchored centers increased 5.3 percent year-over-year. But JLL reported investors have high confidence in the sector.
The volume of sales transactions involving grocery-anchored centers dropped nationally by 30 percent in the first 10 months of 2018 compared to the same period in 2017 and totaled $9.3 billion, according to Real Capital Analytics.
