Daily Management Review

Challenging Established Supermarkets, Amazon Opens Line-free Grocery Stores


12/06/2016




Challenging Established Supermarkets, Amazon Opens Line-free Grocery Stores
A new competition with supermarket chains was sparked off as Amazon.com Inc opened a brick-and-mortar grocery store in Seattle without lines or checkout counters, the online retail giant announced on Tuesday.
 
A bill is sent directly to the shoppers’ Amazon accounts if they do not replace items that have been picked up by them as sensors placed on the racks detect what items shoppers have picked off the shelves. This is the how Amazon Go, the online shopping company's new 1,800-square-foot (167-square-meter) store, would try and pose a challenge to the established retail store chains.
 
Groceries is the one of the biggest retail categories that Amazon.com has yet to master and this move of setting up the brick and mortar store marks Amazon's latest push into the groceries segment.
 
"It’s a great recognition that their e-commerce model doesn’t work for every product," said analyst Jan Dawson of Jackdaw Research, noting that physical stores would complement AmazonFresh.
 
"If there were hundreds of these stores around the country, it would be a huge threat" to supermarket chains, he said.
 
There was a fall of 0.5 percent at the close in the S&P 1500 food retail index, which includes Kroger Co, Whole Foods Market Inc and other companies. Shares of Amazon closed up about 2.6 percent.
 
Amazon Go is expected to be open to the public early next year and is available now for employees of the company only, the company said.
 
The Wall Street Journal reported on Monday, citing sources that ff tests are successful, Amazon plans to open more than 2,000 grocery stores. the newspaper report further said that other projects which include a store that would let drivers pick up goods at the curbside are being considered by the company as other store formats.
 
Amazon declined to comment on the report.
 
"The checkout lines are always the most inefficient parts of the store experience," said Neil Saunders, managing director of retail research firm Conlumino. "Not only would you save a lot on labor costs, you actually would make the process much quicker for consumers and much more satisfying."
 
He said that still, the grab-and-go experience would take getting used to.
 
Sanders said some people may "feel like they stole" an item.
 
Amazon said that ready-to-eat meals made fresh by on-site chefs and local kitchens and bakeries would also be offered at the new store in addition to groceries such as bread and milk.
 
Therefore, fast-casual dining chains like Chipotle Mexican Grill Inc as well would potentially become competitors for Amazon Go by this step.
 
However the first physical store for the e-commerce company to open is not Amazon Go.
 
In addition to pop-ups at malls where it displays Amazon devices such as the Kindle, Amazon has a book store in Seattle.
 
(Source:www.reuters.com) 






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