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New format in the works at Amazon

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SEATTLE — Amazon has confirmed plans for a new grocery format under the Amazon brand that will debut next year in the Woodland Hills neighborhood of Los Angeles.

The format will be distinct from the company’s Whole Foods Market chain, according to published reports. The inaugural store will be larger than its Amazon Go convenience stores and will feature a conventional checkout.

Amazon has signed leases for more than a dozen locations in Los Angeles as it accelerates its grocery push, The Wall Street Journal reported. The locations tend to be outside urban cores and would cater to middle-income shoppers.

The Woodland Hills store will occupy a renovated 35,000-square-foot building that formerly housed a Toys ‘R’ Us unit, the Journal reported.

Amazon is reportedly looking at grocery spaces in the New York metropolitan area, New Jersey and Connecticut, many of which are in strip centers and would accommodate stores ranging in size from 20,000 square feet to 40,000 square feet.

Amazon has about 500 Whole Foods stores in 42 states, which comprise the bulk of the company’s retail footprint. It also has 23 open or announced Amazon Go stores, 19 Amazon Books stores and six Amazon 4-star stores.

Its physical stores units accounted for 7.4% of Amazon’s $233 billion in sales last year. Amazon said third quarter sales from physical stores, the vast majority of which are purchases at Whole Foods stores, declined about 1% from a year earlier to $4.2 billion.

As it expands the footprint of its physical stores, Amazon is leveraging its large base of Prime members to increase its share of the U.S. grocery market.

The company this month announced plans to make free grocery delivery a benefit of Prime membership. Members in more than 20 major metropolitan areas are eligible for free two-hour grocery delivery after the company eliminated charges of an extra $15 per month, or $180 per year, for Amazon Fresh delivery on top of the $119 annual Prime fee.

The new delivery option is in addition to the free delivery Amazon offers to Prime members who make online purchases valued at $35 or more at many of its Whole Foods stores in the United States.

Amazon Fresh delivers orders from fulfillment centers that are located close to customers, while Whole Foods orders are fulfilled in the grocery stores.

Amazon continues to integrate its technology and services into Whole Foods beyond offering online ordering and pickup options. It also has incorporated Whole Foods ordering into its Alexa voice assistant.

Analysts expect Amazon to leverage its extensive supply chain to help stores in the new grocery format to compete on price and to fortify its grocery delivery and pickup services.

Analysts also expect Amazon to draw on the extensive customer data it collects and the retail experience it has garnered in the 29 months since acquiring the Whole Foods chain.

So far, however, Amazon has made modest headway in the U.S. grocery sector. It controls just a small fraction of a market that is dominated by Walmart, which captures nearly a quarter of all U.S. grocery spending.


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