Amazon’s Supermarket

Amazon.com Inc. has chosen the former Toys R Us location in the Warner Center neighborhood of Woodland Hills as the debut site for a new brand of grocery store. The e-commerce giant confirmed earlier this month it will put a company-branded supermarket at 6245 Topanga Canyon Blvd., a continuation of the company’s push into the food sector. This is the first official detail on what will become of the property since the L.A. City Planning Commission’s website changed its use from retail to supermarket months ago, though rumors of Amazon’s involvement began circulating among Warner Center tenants in September. The 35,000-square-foot site has been vacant since Toys-R-Us shuttered in early 2018. City Councilmember Bob Blumenfield said he’s happy to see Amazon take the property and establish a presence in the region. “When it comes to convenience, variety and innovation, it’s hard to find another company that competes with Amazon and I’m excited that they chose the West Valley to open their first fully operational grocery store,” he told the Business Journal via email. “My staff and I have opened a dialogue with Amazon representatives and more details will be released soon.” New concept Amazon said the grocery store will be different from both Whole Foods Market, the organic-focused chain it acquired in 2017 for $13.7 billion, and Amazon Go, the company’s series of cashier-less convenience stores that launched last year. It will open in 2020 and likely feature lower pricing than Whole Foods, which it said will not compete with the new brand. Retail real estate broker Matthew May, president of May Realty Advisors in Sherman Oaks, predicted the grocery will be more traditional and compete with Kroger Co.’s Ralphs and similar chains. He said because today’s grocery shoppers frequent two to four places for consumable goods rather than just one, it would be wise of Amazon to have a presence in each submarket. “If they’re losing sales to a competitor, why not be their own competitor?” May said. In addition to Whole Foods, which has more than 500 stores across the U.S., and Amazon Go, which now has 18 operational stores and thousands more planned to open by 2021, Amazon offers grocery delivery through online service Amazon Fresh. May said the Warner Center property boasts several qualities that could have attracted Amazon. It is surrounded by rigorous development, including the construction of thousands of apartments over the next few years, and has a bustling office presence. Plus, it’s generally difficult to find “big box” vacancies in densely populated, affluent areas such as Woodland Hills, so it made sense for Amazon to snatch up the former Toys-R-Us site. “The San Fernando Valley is very family oriented,” he added. “Why not go where the families are?” Amazon has published four job postings for the Woodland Hills store on its website, including for a store lead, grocery associate and food service associates. The postings refer to the location as “Amazon’s first grocery store,” suggesting the future expansion of the still-undisclosed brand to locations throughout the U.S. “It’s not going to be a three-store rollout,” May said. “There’s a lot of stores in the works.” It’s no secret Amazon is vying for a larger slice of the food industry pie, valued at a whopping $800 billion last year. In March, the Wall Street Journal reported Amazon planned to “open dozens of grocery stores across the United States as it looks to expand in the food business.” Synergy May explained that Amazon’s ownership of Whole Foods will make scaling up the new brand a whole lot cheaper and logistically easier. Whole Foods’ private label 365 was discontinued in January, but Amazon still owns all the manufacturing and production centers and equipment — it would be easy to put them back to work for the new concept. May said he expects Amazon to do so as the industry at large is trending towards private label goods and their higher profit margins for retailers. “Amazon never had a private label operation,” he said. “One of the things they got when they bought Whole Foods was the private label and the 365 branding. Not the brand itself, but the supply side of it. So they’re able to become far more efficient as they grow.” May said he knows of two additional Amazon grocery deals in the Valley but couldn’t share details. “There will be synergy from an operational standpoint,” he explained. “There’s enough distance between them that they won’t be cannibalistic.” The proliferation of Amazon grocery stores throughout the Valley could benefit the company’s home delivery service Amazon Fresh. May said Amazon can use these stores as last-mile delivery stops to inexpensively transport food products from distribution centers to people’s homes. “Everyone is looking at last-mile delivery for warehouses. Guess what: Target is doing it with retail,” May said. (Amazon’s grocery) stores can become last-mile as well.” Of course, delivering fresh groceries to a customer’s doorstep presents a bigger challenge than Amazon’s usual stock because unlike books and electronics, food products perish. But, in addition to the eight existing Whole Foods between Glendale and Thousand Oaks, each new grocery location will make sure that online customers in the immediate surrounding neighborhoods can receive their orders before the contents begin to go bad. That could boost consumers’ confidence in the service, with increased sales to follow, May said. Valley reception Echoing Blumenfield’s comments, May said Amazon’s choice to debut the supermarket in Woodland Hills is a sign that big companies are finally showing the Valley the respect it deserves. After all, if measured as a unified city of its own, the Valley would have the fifth largest population — not bad for a community historically overshadowed by the city of Los Angeles. “It’s almost like, ‘Ha ha, West Side, we got it first!” May said in jest. But some within the grocery industry are more bearish on what Amazon’s market entry means for them. The United Food and Commercial Workers labor union has been a vocal critic of Amazon’s treatment or workers, and called Amazon’s business model “predatory,” adding that it will “needlessly destroy millions of jobs” in the grocery sector. “Amazon isn’t about providing better food or customer service, and it certainly is not about fair competition,” said union President Marc Perrone in a statement. “Launching this grocery chain is an aggressive expansion of Amazon’s market power as it seeks to fundamentally change our country’s food retail and service economy while eliminating as many retail workers as possible.” Amazon specified that the new grocery brand will have a conventional point-of-sale system with human checkout employees. But the company is known to tweak its business model to new technology and market conditions, and as the company perfects its cashier-less system with Amazon Go, it could adopt similar systems in its new supermarket chain.