Beer to go? Amazon applies for liquor license at its secretive grocery store
SAN FRANCISCO – Amazon has applied for a liquor license for its secretive drive-through grocery store in Seattle, one of the first official documents that links the almost-complete site to the online sales behemoth.
Plans for the 9,700 square-foot building describe it as “a new model of grocery shopping.” Customers place their orders online, then drive by during a specific 15-minute to two-hour window and have their groceries delivered to their cars.
The documents filed with the city's planning department never name the company building the proposed drive-through grocery facility. However, the liquor license application for the address in the Ballard neighborhood of Seattle, filed Feb. 7, lists Amazon as the proprietor.
After perusing the plans, retail food consultant Roger Davidson with the Oakton Advisory Group called the design "amazing." While there are many chains that offer drive thru and pickup service for groceries, with this building Amazon has one-upped them all, he said.
“They’ve designed this facility so that it’s super efficient, so they’re going to be more competitive on costs and labor. I bet you can put in an order and have it in 30 minutes the way it’s arranged,” he said.
Amazon has done an excellent job of getting consumers to buy all sorts of things they once wouldn’t have dreamed of buying online, said Rupesh Parikh, an analyst who covers food and grocery at Oppenheimer & Co. Inc. “Now, grocery is the next category that people are going to feel comfortable with,” and Amazon wants their business, he said.
From the city planning documents, it appears there will be little or no shelves of food and other items to choose from. Instead, all ordering must be done online. The lion's share of the space is devoted to food storage.
Customers who walk in will order from provided electronic tablets and then wait in the "retail room" for their order to be brought to them, according to the documents.
The Seattle company is also rumored to be working on similar sites, one south of downtown Seattle and two in Silicon Valley. The Ballard store is the furthest along. Its temporary certificate of occupancy was issued on Jan. 12.
Amazon (AMZN) declined to comment on the site or its grocery ambitions.
Work at the site of this emporium began in 2016. It's situated in what was once the sleepy Scandinavian neighborhood of Ballard in Seattle’s north end, now a popular spot for tech workers to buy homes. Located on a busy arterial, it's a few blocks between an upscale Safeway and a Trader Joe’s and a near several microbreweries and coffee roasters.
The model is different from the Amazon Go convenience store that opened last fall near the company's headquarters. There, customers walk in, fill their baskets and then walk out, with everything being tallied up by computer and no checkout lines in sight.
Amazon just opened a grocery store without a checkout line
For Amazon, moving deeper into groceries is in many ways low-hanging (if expensive to pull off) fruit. Half of online grocery shoppers also have an Amazon Prime membership, so Amazon knows that some of its best customers are going someplace else to do their shopping.
“So they’re trying to recapture them and keep them in their ecosystem,” said Darren Seifer, food consumption industry analyst with the NPD Group in Chicago.
An already shifting supermarket landscape
Amazon's move into grocery pickup isn’t by any means the death-knell of the supermarket — it’s just one more trend in a rapidly changing arena.
Buying groceries online doesn’t replace visits to the supermarket. About three-fourths of online grocery shoppers still go to brick and mortar stores, Seifer said.
But they may be less likely to enter the traditional 50,000 square foot supermarket.
Smaller stores on the European models of Aldi and Lidl are “hot, as is the larger 85,000 to 90,000 square foot store like Hy-Vee which has — everything, clothing, dry cleaning, restaurant, beauty products,” said Phil Lempert, an analyst who studies grocery marketing and consumer trends.
Wal-Mart was first
Amazon is not the only one playing in this space.
Walmart (WMT) beat it to the punch by several years when it opened its first stand alone drive-thru grocery pickup site in Bentonville, Ark. in 2014. Customers could order groceries and sundries online, then schedule a pickup time. Even earlier, it began offering curbside grocery pickup at a Walmart in San Jose in 2011, said spokesman Scott Markley.
In the east, ShopRite offers a similar service, as does Hy-Vee in the midwest.
Walmart's program is in place in 600 stores in more than 100 markets across the United States, with 500 more locations being added in the next year, said Markley.
It uses personal shoppers who fill the online order then bring it out to the customer’s car in a designated part of the store’s parking lot. Orders placed before 10 am can be picked up by 4 pm.
Walmart's push into online sales was one reason the company saw profits rise in the fourth quarter and continues to see sales rise.
Walmart's service isn’t available in the Seattle area, though. The closest are in Vancouver, Wash. across the Columbia river from Portland, Ore. and in Spokane in eastern Washington.
Grocery versus fresh
Online sales have been slowly picking away at the supermarket model. About 6% of Americans do at least some of their grocery shopping online, NPD Group found.
Much of that has been for items typically found in the interior of a supermarket, canned and packaged goods, toilet paper, pet food, soda and the like. Now retailers want to convince customers to move to online for what they’d buy on the perimeter of the supermarket — the areas where fresh fruit, produce, meat and dairy are found.
“That’s harder to replicate online,” Oppenheimer's Parikh said. A can of Campbell's soup is still a can of soup, but if the beets are too big and woody, or the broccoli's starting to flower, customers are unhappy.
Careful training of the store personnel who do the picking is key. Walmart educates its personal shoppers on banana ripeness, for example, so that customers who want their bananas hard and gleaming yellow get just that while those who want a sweeter, brown-speckled banana get that.
In the end, while Amazon's model isn't that different from Walmart's, its customer base is.
"It's a totally different demographic. Young and hip are not the Walmart shoppers. Amazon is," said Lempert.
The only question is whether Amazon can pull it off, said Tom Enright, an analyst with Gartner.
"It means that they will need to be a retailer, something that they have very limited experience of to date."