Amazon.com, Inc. (NASDAQ: AMZN) will
open dozens of grocery stores in several U.S. cities, the Wall Street Journal reported Friday.
Amazon is planning the first store, in Los Angeles, possibly by the end of
this year, and has signed leases for two others to open in early 2020, the Journal reported, citing
sources familiar with negotiations that the paper didn’t name.
Amazon shares were up 1.41 percent to $1,662.94 after the news broke Friday, and shares of several big competing grocery chains
took a hit.
The Plan
The new stores won’t be intended to compete with Whole Foods, also owned by Amazon. The new chain will carry a broader
selection, rather than focusing on upscale and healthy categories, the Journal said.
Amazon, which started primarily as an online book retailer but has grown into the dominant e-commerce site in the nation, may
also explore buying out regional grocery chains as part of its move into the market, one source told the Journal.
Cities involved in early negotiations for stores include San Francisco, Seattle, Chicago, Washington, D.C. and Philadelphia, the
paper reported.
The Sector Reaction
Shares of other major chains in the $840-billion grocery business were dropping on the news, including Kroger
Co. (NYSE: KR), which saw its shares fall 2.7 percent
to $28.54. Shares of Walmart Inc. (NYSE: WMT)
were down 0.79 percent at $98.21, while Costco Wholesale Corporation (NASDAQ: COST) was off 0.35 percent at $217.97. Target Corporation (NYSE:
TGT) shares initially dropped, but rebounded and were up
marginally to $72.67.
BJs Wholesale Club Holdings Inc. (NYSE: BJ)
was also down 0.95 percent to $25.08, while Casey’s General Stores Inc. (NASDAQ: CASY) dropped 0.3 percent to $134.33.
Amazon's Grocery Experiment
Amazon already has been experimenting with grocery stores, opening
10 Amazon Go stores in the last year that feature cashierless shopping where customers are electronically charged for whatever
they take out of the store. It’s not clear if the new stores will have cashiers.
Amazon bought Whole Foods for $13.7 billion in 2017, a move that was hailed at the time as one that could revolutionize the
grocery industry and blur the lines between online and brick-and-mortar retail.
A year-and-a-half on, the two brands are strongly integrated: walk into a Whole Foods store and you’ll have chances to buy an
Amazon Echo and see lockers where customers can pick up food they’ve ordered online — a feature that has increased the number of short
trips to Whole Foods. Customers also get Whole Foods discounts
for being an Amazon Prime member.
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