Will Amazon's 2-Hour Whole Foods Delivery Skew Retail Pitch?
Zacks Investment Research | Feb 12, 2018 09:48PM ET
Groceries, until recently an insular market in the fiercely competitive retail zone, may see a radical shift in the days to come. The landscape is seeing a rapid change, with more players jumping on the offline bandwagon. The latest move in this space comes from Amazon (NASDAQ:AMZN) , which is offering free, two-hour delivery from Whole Foods stores to its Prime members in four cities — Austin, Dallas, Cincinnati and Virginia Beach. This is perhaps the beginning of a battle that will only intensify in the days and months to come.
The move comes within a year of the e-commerce giant’s $13.7-billion acquisition of supermarket chain Whole Foods. Customers in Austin, Dallas, Cincinnati and Virginia Beach can now order fresh produce, meat, seafood, flowers and other items that their local Whole Foods stores stock.
Such a move was expected by Amazon given that it has specific plans of exploring and adding novelty to the untapped online groceries market, and the Whole Foods acquisition was a giant leap toward this direction. Needless to say, this will most likely set alarm bells ringing for brick-and-mortar grocers that so long rested assured of business safety.
Consumer Focus Route to Success
That said, besides sparking fear among the traditional brick-and-mortar stores, the two-hour free delivery service has been introduced keeping in mind customer demands. Consumers look for convenience and good bargains and Amazon is focusing on both. Per a Walker Sands survey, 40% would buy groceries online if they were less expensive and 23% would for it if it were more convenient.
The Whole Foods acquisition was certainly a strategic move by Amazon and perhaps the best option, as most of its other technology-driven food delivery initiatives such as Amazon Go have faltered. The acquisition immediately gave Amazon access to Whole Foods’ 450 stores across the United States, thus giving it enough power to compete with brick-and-mortar giants like Walmart (NYSE:WMT) , Target (NYSE:TGT) , Dollar Tree (NASDAQ:DLTR) and Dollar General (NYSE:DG) . Target has a Zacks Rank #1 (Strong Buy). You can see Zacks Investment Research
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