Amazon Looks to Up Its Physical Grocery Store Presence

Having more brick-and-mortar stores will allow the online giant to up its game in the grocery industry.

May 12, 2023

ALEXANDRIA, Va.—Amazon isn’t checking out of the grocery sector just yet, despite having a tiny share of the industry after years of effort. But, it will need a bigger physical store presence in order to expand, reports The Wall Street Journal.

In 2006, Amazon debuted a grocery storefront, and in 2017, it purchased Whole Foods for $13.1 billion. The online retailer then opened up its own branded grocery stores, featuring its proprietary technology, including Just Walk Out, Dash Carts and Amazon One. The company has 3% of the U.S. grocery market share. In comparison, Walmart has a 30%, and Kroger has 11%.

In order to up its share, Amazon needs more physical grocery stores, according to the Journal, as brick-and-mortar grocery stores accounted for about 90% of U.S. grocery sales last year. Despite the pandemic pushing consumers to online for their groceries, many have returned to the physical market. Around 46% of respondents surveyed by UBS in 2022 said they shopped online for groceries at least once a week, down from 48% in 2020.

“We aspire to serve more of our customers’ grocery needs than we do today,” said Amazon CEO Andy Jassy in his second annual letter to shareholders. “We need a broader physical store footprint given that most of the grocery shopping still happens in physical venues.”

Whole Foods has 530 locations in the U.S. and UK, and Amazon’s grocery stores, Fresh and Go, account for 60 stores, whereas Walmart has 5,300 stores and Kroger operates 2,700. In order to add more physical locations, Amazon will need time and funds, according to the Journal, and the real estate market is challenging.

“A parcel of land in a place with residential density probably has already been developed as a grocery store,” James Cook, JLL’s director of retail research, told the Wall Street Journal.

Scott Mushkin, managing partner of research firm R5 Capital, told the Journal that an acquisition could help Amazon have more physical spots. One option might be purchasing stores that Kroger and Albertsons would have to divest as part of their proposed combination.

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