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SEATTLE — Amazon.com has a goal of becoming a top five grocery retailer by 2025, a source familiar with the matter told Bloomberg. The online giant reportedly recognizes that brick-and-mortar stores play a key role in a renewed push toward grocery after years of experimentation with Amazon Fresh, its grocery delivery business.
The company is preparing to embark on this journey on multiple fronts. On March 14, Amazon Fresh signs went up at a drive-in grocery location in Seattle's Ballard neighborhood, where the test site will allow shoppers to stop and have drive-in grocery orders brought to their cars, as CSNews Online previously reported.
Additionally, following a 2016 purchase of supply chain software from Llamasoft Inc. — an unusual move for the company, which typically builds its own infrastructure — Amazon recently restructured how its various grocery teams were managed in order to narrow their focus and set clear priorities, according to sources.
Rather than ship products directly to customers from its warehouses, Amazon plans to invite shoppers into its own physical grocery stores. Three store formats will be tested in its home base of Seattle before a national rollout next year: Amazon Go convenience stores, a hybrid format that mixes elements of online and in-store shopping, and the drive-in grocery kiosks.
Reaching the top five milestone would require annual food and beverage spending through Amazon's sites to increase from $8.7 billion in 2016 to more than $30 billion, as well as billions of dollars invested in stores and warehouses.
"A bunch of smart people at Amazon have been thinking about re-imagining the next phase of physical retail," Scott Jacobson, a former Amazon executive and current managing director at Madrona Venture Group, told the news outlet. "They want more share of the wallet, and habitual, frequent use of Amazon for groceries is the ultimate goal."
Currently, Amazon shoppers who want to buy groceries online can choose from Amazon Fresh for $14.99 a month in approximately 20 cities in the United States; Amazon Pantry for a $5.99 per box delivery fee; Prime Now, Amazon's quick drop-off service; stick-on Dash Buttons, which let consumers order many household products and some groceries with a finger tap; and Subscribe & Save, which offers discounts on periodic deliveries of items such as paper towels, toilet paper, laundry detergent and other products frequently purchased in grocery stores. Sources said this has led to some internal tension as the various initiatives compete with each other.
Brick and mortar stores may also alleviate Amazon Fresh's high cost of losses caused by food spoilage, as it could not mark down products nearing expiration.