Why is Amazon opening in-person stores just as consumers shift to online grocery shopping?

A year into an isolating pandemic, as online grocery sales continue to grow, the seemingly King of Online, Amazon, is expanding its *checks notes* in-person stores? Huh?

It’s hard not to question the move. Why would any grocery retailer be expanding in-person stores at a time like this? Well, I have a theory. In short, stores double as distribution points. 

But let’s back up a bit. So yes, Amazon recently announced plans to open its first grocery stores on the East Coast. They follow other recent Amazon grocery store openings in Los Angeles, Southern California and the suburbs of Chicago. 

As CNBC details:

The company plans to open two grocery stores in the Washington, D.C., area. One will be in the city’s Logan Circle neighborhood and the other will be in the northern Virginia town of Franconia, not far from Amazon’s second headquarters, dubbed HQ2, which is in the Crystal City section of Arlington.

Two other grocery stores are planned for the Philadelphia suburb of Warrington, Pennsylvania, and for Chevy Chase, Maryland, Amazon confirmed Thursday.

While it remains unclear if the new East Coast stores will be the company’s signature Fresh Stores, it seems likely. But what are “Fresh Stores” exactly? Well, as CNBC explains:

Amazon’s Fresh stores look like a traditional supermarket, but also feature some high-tech touches, such as smart Dash Carts that let shoppers skip the checkout line, and voice-activated Echo Show displays. However, unlike Amazon-owned Whole Foods, Fresh stores are meant to appeal to a broader array of shoppers, by offering products at lower price points than the upscale grocer, as well as traditional staples including Coca-Cola drinks and Kellogg’s cereal. There’s also a dedicated store area for shoppers to pick up and return Prime packages.

It’s that last sentence that’s especially telling. They allow shoppers to both pick up and return packages — in other words, logistics.

The stores make the perfect distribution centers, especially for cold chain groceries and small items that don’t usually make sense to ship, like single candy bars.

Personally, for my rural Midwest consumer life, this makes a lot of sense. The pandemic inspired me to finally try Walmart pick up, and it was, in short, amazing. My only regret is waiting as long as I did to try it. 

Long-term, then, as more people get comfortable with the concept, and retailers work out the kinks, it seems inevitable that grocery stores will eventually evolve into, at least in part, distribution centers where the main focus for employees is fulfilling online orders for local pickup and delivery. 

I’m not alone in my theory. CNBC shared insights from a recent Morgan Stanley analyst’s note about the in-person Amazon grocery stores’ real value as “nodes of fulfillment.” As the analyst wrote, in a note shared by CNBC:

“As consumers increasingly demand same-day grocery fulfillment (both for delivery and pickup at store), Fresh stores could therefore fill a previously missing hole in AMZN’s grocery fulfillment process while also building AMZN’s brand in food retail."

So where does this leave candy companies? Well, any manufacturers that aren't already planning for a majority of grocery sales to happen online are behind. Thankfully, it’s not too late to catch up. 

First and foremost, candymakers need to make sure retailers are prioritizing purchases traditionally seen as “last-minute” and “impulsive” in their online sales strategies. 

Are retailers offering candy on the final check-out page for online shoppers? Are there options for shoppers to add on things like candy and snacks after they arrive at the store for a pick-up order? And how are online retailers compensating for things like traditional end-of-aisle displays meant to inspire shoppers to grab items that weren’t on their list?

Yes, right now, Amazon is expanding its in-person store presence. But don’t let that lull you into thinking Amazon believe in-person shopping is the future of grocery retail. In fact, it’s very likely exactly the opposite.