Amazon (AMZN) has been named the world’s No. 1 food retailer for the second consecutive year by The Retailer Preference Index. The company currently operates 23 Amazon Fresh stores, with at least 24 more expected to open in the United States.
For a business focused on e-commerce, a low-margin business such as a brick-and-mortar outlet may not seem like such a smart investment. However, as we dig deeper into Amazon’s strategy, we realize it’s a brilliant move.
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For an e-commerce titan, migrating to brick-and-mortar is a synergistic way to increase revenue streams. In fact, Amazon overtook Walmart (WMT) as largest apparel retailer in the United States., according to Wells Fargo.
Yet there is more to the story. Thanks to innovative features in its physical stores – such as “Just Walk Out” and “Amazon Dash Cart” technologies – the Seattle-based titan is able to collect data on shoppers who are not members of the loyalty program Amazon Prime.
It’s growing fast
According to results for the fourth quarter of 2021, Amazon’s physical store sales increased nearly 17%, the third consecutive quarter of double-digit growth. Data from Placer.ai shows that Amazon Fresh stores in California and Illinois are stealing market share from traditional retailers.
Amazon’s physical presence is still minimal compared to its major competitors. Bezos’ giant controls more than 600 brick-and-mortar stores in the United States, 511 of which are Whole Foods Market stores. Market leaders Walmart and Kroger (KR) have 4,668 and 3,225 stores respectively.
Another great opportunity
Although the pandemic has doubled the market share of digital grocery sales (from 5% to 10%), half of the American population who shop do not buy online and do not intend to do so, according to the retailer preference index. For 2022, eMarketer estimates that online food and beverage sales will represent 11.2% of the total market.
While nearly 90% of the grocery market is brick-and-mortar in an era where digital innovations rule, Amazon’s aggressive business model has everything it takes to turn shoppers away from consolidated players. long-standing such as Walmart and Kroger.
Which of the following stores do you think is the fastest growing food retailer?
(Disclaimer: This is not investment advice. The author may own one or more stocks mentioned in this report. Additionally, the article may contain affiliate links These partnerships do not influence editorial content. Thank you for supporting Amazon Maven)