Why Amazon Fresh Stores Are Popping Up Next To Whole Foods Markets

  • Amazon is opening Amazon Fresh stores minutes away from Whole Foods locations.
  • But analysts say Amazon Fresh is looking for a different kind of customer.
  • Fresh wants to capitalize on the demise of chains such as Albertsons and SuperValu, analysts say.

Across the US, an unlikely store is popping up down the street from Amazon-owned Whole Foods supermarkets: Amazon Fresh Stores.

Amazon’s gamble is expanding its food business beyond affluent Whole Foods shoppers, analysts say.

Amazon has opened 30 Fresh stores since mid-2020, according to the company’s website. Several of those openings have moved Fresh locations close to existing Whole Foods stores.

In downtown Washington DC, for example, Amazon opened a Fresh store near Logan Circle last year. Just a seven minute walk south, there is a Whole Foods.

It’s a similar situation in Seattle, where a downtown Fresh store is a six-minute walk from the nearest Whole Foods.

Even the very first Fresh grocery store, which is located outside of Los Angeles in Woodland Hills, is just under 2 miles — about a five-minute drive — from Whole Foods.

Whole Foods and Fresh are central to Amazon’s evolving strategy for brick and mortar stores. The Seattle company closed dozens of other stores, including Amazon Books, 4-Star and Pop Up locations. It also said in early May it would close six Whole Foods in four states.

Amazon did not respond to a request for comment from Insider about its strategy for Fresh stores.

A ‘market saturation move’

Most retailers avoid placing similar stores too close together. Their concern is that one store will eat up another’s customer base – a phenomenon called “cannibalization” in the US


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But as it opens new Fresh stores, Amazon is likely going after a new type of customer, said RJ Hottovy, chief of analytics at Placer.ai.

To get a better idea of ​​who is shopping at Amazon Fresh, Placer.ai looked at the other supermarket chains shoppers frequented. The results suggested they are more likely to shop at other “value-oriented” chains than at Whole Foods.

“This seems to be more of a market saturation move than anything else,” Hottovy said.

Fresh food stores look different from Whole Foods stores. In addition to lower prices, Fresh stores offer more national brands and fewer health-focused options than Whole Foods stores.

Fresh stores are also better integrated with some Amazon tech. For example, before leaving the house, customers can use Alexa to create a shopping list and then check items off their list while shopping in-store using an Amazon Dash smartcart.

Several stores also use Amazon’s Just Walk Out technology, which allows customers to pay for their orders without checking out.

Whole Foods has also added Amazon’s technology to its stores since Amazon acquired the chain and its 500 stores in 2017. Amazon Prime customers scoured Whole Foods aisles to fill orders during the early months of the pandemic, and the first Whole Foods store using Just Walk Out opened earlier this year in Washington, DC.

But Whole Foods’ management has also opposed some of Amazon’s proposed changes, such as selling ads on the grocer’s mobile app, which has led to a strained relationship between Whole Foods and Amazon.

Amazon itself has officially said little about its long-term plans for Fresh stores. But Brian Olsavsky, Amazon’s senior vice president and CFO, said during the company’s April first quarter call that Fresh stores were an important place for Amazon’s checkoutless technology.

“We are confident that the Just Walk Out technology will be a blessing, a benefit to customers,” said Olsavsky.

“We’re very excited about what’s in the works,” he added about plans for Fresh stores, saying Amazon was still on “day one” of the project.

Rival chains are ‘stuck in the 90s’

Whole Foods has maintained its reputation as a retailer for higher-income buyers, said David Livingston, a consultant and expert on grocery location selection.

“They love being ‘Whole Paycheck,'” Livingston said, referring to a nickname Whole Foods stings for its high prices. “That’s how they became so successful.”

Amazon Fresh, on the other hand, is targeting a more middle-income consumer at a time when many established grocers are struggling to stay relevant to young middle-income consumers, he said.

Over the past decade, chains including SuperValu and Albertsons have closed stores and curtailed their e-commerce spending, giving players like Amazon Fresh an opportunity.

“A lot of these stores signed 20-year leases 20 years ago,” Livingston said. “You’ll see a lot of conventional stores just disappear.”

He added: “As more and more supermarket chains that were stuck in the 1990s go out of business and their customer base dies, Amazon Fresh will target a newer generation of consumers.”

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