Amazon Plans Expansion with New Supermarket Chain

March 4, 2019
1035 Views

The world’s largest ecommerce company could soon become one of the largest grocery retailers. News broke last week that Amazon Inc. (NASDAQ: AMZN) is planning to roll out dozens of grocery stores across the United States. Costco, Kroger, and Walmart could all feel the pinch as stock investors have already showed interest in Amazon’s expansion.

The news was initially leaked by the Wall Street Journal, although Amazon itself has declined to make an official statement so far.

Amazon Supermarkets by 2020?

According to the Journal, Amazon has already signed leases for its brick and mortar supermarket expansion.

The company already has a strong presence in the grocery business through Whole Foods Market, a wholly owned subsidiary since 2017. Whole Foods focuses on organic food options as well as products that are free of preservatives, hydrogenated fats, sweeteners, artificial colors and flavors.

New supermarkets would likely carry the Amazon brand and would focus on traditional products that appeal to a larger percentage of U.S. consumers.

The first Amazon supermarkets would open in Philadelphia, Washington D.C., Chicago, San Francisco, and Seattle. Excluding Washington D.C, these are some of the most populous cities in the nation.

Amazon’s first supermarkets will likely open in the first half of 2020, giving the company ample time to figure out the logistics, staffing, regulatory, and marketing aspects of the expansion.

Amazon Stock Up, Potential Competitors Down

It’s stock finished the Friday regular trading session up 1.95%. The stock has been popular throughout the year, gaining 11.30% since January. This is slightly below the NASDAQ Composite’s 14.47% growth in the same period.

Amazon’s gain is a loss for potential competitors, and investors may want to reevaluate their portfolios if they are holding traditional grocery stocks. Here’s what Friday trading looked like for three key grocery stocks on the U.S. Market:

  • Walmart (NYSE: WMT) finished down -1.07%
  • Kroger Co. (NYSE: KR) was down -4.47%
  • Costco (NASDAQ: COST) managed to stay in the green, but growth was low at just 0.32%.

Historically, Amazon’s growth has disrupted established markets, even when the company was still primarily an online book retailer. The company has the buying power, distribution network, and business acumen to make a massive impact on the grocery market.

If the venture goes ahead and turns a profit for Amazon, investors will only benefit in the long term.

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