Fleet Financing

Amazon makes noise in The Grocery Wars

In the eyes of investors, Amazon’s performance and future prospects are seen and interpreted in terms of the health of its cloud division.

And for good reason: Amazon Web Services is the driving force behind the e-commerce giant’s sales. In the third quarter, AWS accounted for all of Amazon’s $4.9 billion in operating revenue. The same will likely be true for Q4 and the coming months as cloud infrastructure continues to grow through a period of massive digital transformations for businesses around the world.

The second thing investors are interested in is Amazon’s investments in the entertainment industry and also in devices and hardware aka Fire, Echo, Astro, Glow, etc. Or how the company intends to compete with Netflix. (NFLX) – Get the report from Netflix, Inc.disney (SAY) – Get The Walt Disney Company ReportApple (AAPL) – Get the Apple Inc. TV+, and HBO MAX in streaming and its thunderous sports projects with the purchase of numerous television rights in football and soccer, and the financing of films and original content for Prime.

Once investors have considered all of this, they will then turn to the grocery store. But generally, their reading or their interest is focused on one point: how much did this segment of the activity cost the company?

Basically, the Whole Foods and Amazon Fresh chains are seen more as cornerstones for Amazon, especially since many articles have focused on the working conditions of employees in warehouses, the desire to unionize employees.

Headaches with bad publicity

Amazon is currently defending itself against this bad publicity and is giving prominence in its press releases to how the company treats its employees. The Seattle-based company also continues to hammer home the benefits granted to its employees and the various wage increases made.

“Job seekers in the United States can receive an immediate contingent offer for seasonal roles with an average starting salary of $18 per hour, signing bonuses of up to $3,000, additional $3 from l time based shifts in many locations and the ability to transition to long-term careers,” Amazon wrote in its third quarter earnings press release.

All of these efforts, however, confirm investor sentiment that grocery stores and brick-and-mortar stores are a headache for Amazon.

“In the fourth quarter, we expect to incur several billion dollars of additional costs in our Consumer business as we manage labor shortages, rising labor costs, global supply chain issues and increasing freight and shipping costs, while doing whatever it takes to minimize the impact on customers and business partners this holiday season. It will cost us dearly in the short term, but it’s is the right priority for our customers and partners,” warned CEO Andy Jassy.

But on closer inspection, Whole Foods and Amazon Fresh have come a long way and made headway in the grocery wars. Admittedly, they are still far from Walmart’s volumes and traffic. (WMT) – Get the report from Walmart Inc.Trader Joe’s, Safeway or Kroger (KR) – Get the Kroger Co. report..

But “Amazon has become a major player in physical grocery stores through its Whole Foods and Amazon Fresh brands,” according to foot traffic analytics firm Placer.ai.

Physical store sales – sales of products where customers physically select items in a store – were up 13% in the third quarter compared to the third quarter of 2020. In 2021, they are also up quarter on quarter. other: sales increased from $3.92 billion in the first quarter to $4.2 billion in the second quarter and finally to $4.27 billion in the third quarter.

Whole Foods launched Amazon’s grocery efforts

Amazon acquired Whole Foods in 2017 initially before launching its own chain of grocery stores. The chain, which offers organic products, was struggling, but Amazon saw it as an opportunity to get its hands on a fleet of nationally distributed stores and access, according to Placer.ai, a wealth of data on grocery shopping before starting his own branded grocery business.

But the Covid-19 pandemic is raising fears of a desertion from chain stores as consumers change their shopping habits.

While Whole Foods may have missed out on the pandemic-fueled supermarket boom, the natural grocery leader’s recent foot traffic data has proven the naysayers wrong, according to Placer.ai.

“We have nearly 40 new stores in the works,” Whole Foods announced last May. Basically, the chain anticipates a growth in its activity.

The brand, which has seen foot traffic plummet during the pandemic, is recovering well. In December, visits were down only 5.2% compared to December 2019. This is a far cry from February 2021, when they were down 22%, according to the Placer.ai study.

Amazon fees

Amazon Fresh is riding the local food trend that took off with the pandemic. Although there are currently few Amazon Fresh stores, traffic to existing ones continues to grow.

Placer.ai said it studied data from locations in California and Illinois, and looked at cross-shopping patterns for the brand as a whole. And it shows an increase in visitation.

Between the second and fourth quarters, visits increased for each of the eight stores analyzed.

“While some of the growth may be due to initial Covid-related capacity restrictions, the fact that store occupancy has increased across all areas of these early locations indicates that these sites are generating increased demand at the over time – a positive sign for any retailer,” the study found.

As visitation has continued to increase, the reduction in the size of the real shopping area must mean that the stores are improving to cater to local customers – and can therefore attract more foot traffic from a larger area. small.

But the report warns that “there are a variety of factors that play into the size of the TTA, from working from home to COVID variants, so truly understanding the true reach of each location may require more time.”

Whole Foods and Amazon Fresh are not competitors

Cross-shopping data compiled by Placer.ai shows that in the last six months of 2021, Amazon Fresh customers are buying from Ralphs and Aldi, and are buying less and less from Whole Foods, which means that the competition between Amazon’s two grocery chains has diminished.

“While Amazon Fresh positions itself as a value grocer, whose main competition comes from grocers such as Ralphs and Aldi, Whole Foods positions itself as a premium supermarket chain that caters to a whole different base of With Whole Foods and Amazon Fresh different segments, Amazon is expected to strengthen its position as the leader in offline grocery in 2022,” the study concludes.