Opinions

Amazon is killing the malls and big box stores in the U.S.; Are grocery stores next?

By Chris Isidore

Amazon has turned malls upside down in the U.S., but had left grocery stores unscathed.

That changed on Friday.

Amazon’s $13.7 billion purchase of Whole Foods means the supermarket, and retailing overall, will never be the same. Grocers will now have to contend with the incredibly rich and powerful competitor whose impact on retail has been so dramatic.

Whole Foods store in Florida.

Department and “big box” stores have shed 46% of their workers since 2001, a greater percentage of their jobs than coal mines or factories have lost over the same period. Store closing announcements are piling up at a record pace.

And retail bankruptcies large and small are up 30%, according to BankruptcyData.com. They have included well known names across many sectors: Gymboree, Sports Authority and Payless Shoes have all filed for bankruptcy within the last year.

Sears, the iconic chain that reshaped retailing over the last 100 years, warned earlier this year there is “substantial doubt” it can stay in business.

The grocery industry hasn’t been immune — old-line supermarket chain A&P went bankrupt in 2015. But for the most part, threats to grocers has come from brick-and-mortar retailers entering the sector: Walmart, Target, and Costco are now major forces in grocery.

And while department stores, electronics chains and other retail sectors have been closing stores, the number of grocery stores has continued to grow. It wasn’t until 2015 that the number of pure grocery stores actually started to decline, according to government numbers, and then only slightly.

Only about 2% of about $600 billion in annual grocery sales are made online, according to Daphne Carmeli, CEO of Deliv, which handles same-day delivery for more than 4,000 retailers, including grocers.

“The anticipation was that grocery will go to about 20% online in the next couple of years,” she said. “But grocers have to respond and move faster now. Because that’s what Amazon does. They get into a field and, boom, they get market share and become the leader.”

The Whole Foods acquisition is also scary for grocery workers. Amazon is a leader in the use of robots.

Grocers have been trimming jobs through innovations like self-service checkout lanes. Amazon is experimenting with a store in its Seattle hometown where customers will buy groceries without even having to go through a checkout line, using an app and computer vision. Labor leaders voiced concern Friday that Amazon’s move into the grocery sector will cost even more retail jobs.

The coming years are likely to see a lot of disruption, not only from Amazon but from traditional grocers shifting more sales online. But given its technological advantages, Amazon is expected to have an oversized impact.

“Amazon will redefine convenience,” said Bahige El-Rayes, a principal in the retail practice of A.T. Kearney.

The growth of online grocery shopping has faced barriers. Consumers want to look at food, especially meat and produce, before they buy it.

But part of the problem has also been the need for short delivery distances for perishable items. While Amazon has been building more and more delivery hubs, the Whole Foods deal gives it 456 stores that it can instantly fit into that network, said Josh Olson, analyst with Edward Jones.

“It potentially turns these brick and mortar stores into distribution centers,” Olson said.
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Credit: CNN, http://money.cnn.com

  • Pixelvt

    I am a loyal Amazon customer, I do not go to Walmart, or any other chains, except…… Lowe’s and grocery stores. Some things you just want to pick up and handle and my next steak or fresh corn I want to see. I think Amazon could make an impact on some staple items, but not much. And Whole Foods is not about staple items, unlike Walmart or Costco.

    Amazon sells convenience and going to the local grocery store is convenient too. Even if we had a Whole Foods store here in Burlington I am sure it would be 20/30 minutes away, no thanks. Free delivery of a sight unseen Salmon, no thanks.

    Just my 2 cents.

    • Dan

      I hope you’re right but I recall conversations a few years ago where it was argued that people would never buy shoes and clothes sight-unseen if they had a choice. The trend is toward internet commerce and robotic fulfillment and I’m afraid it’s ineluctable. The marketers care less and less what old people think. The times they are a changing.

      • Pixelvt

        You calling me old ? Just kidding. As I said it is just my take, for sure Amazon will get some market share, how much is anyone’s guess. I often think of trying Blue Apron, but never go there I am not that lazy LOL, I enjoy buying and making food.

        • jon

          Amazon has had food items for at least a decade. Non-perishables. I used to buy Swedish Rye Crispbread from them (not cost effective to EC) in the early 2000s

        • StillWatching

          Yet I still wait for that invite you promised to your next barbecue. You may not be old, but I am. I hope I last long enough to see if you really can do good barbecue ribs.

      • StillWatching

        I like your decision to use ineluctable instead of “unavoidable” because the former suggests that something is so good that it can’t be resisted, while the latter suggests something far more pejorative.

        If online shopping wasn’t preferable to most shoppers compared to the in person experience, it wouldn’t be as successful as it has been. I see no coercion in that, only more choices.

        Once Pixelvt orders his first dozen ears of sweet corn and pork butt on-line and they turn out to be delicious beyond his imaginings and cheaper than he can believe, even his resistance to buying such things online will soon fade.

        • Pixelvt

          I will concede the pork butt but never the sweet corn, come on, start the water, go to the farm stand, buy the corn (or ideally pick your own), come home, pop it in the now boiling water, no way Amazon can top that.

          Ok on the BBQ but not sure when back in town. Trying to find the right pork products is tough (no pun intended) in Cuenca.

    • BDev

      P – “Some things you just want to pick up and handle and my next steak or fresh corn I want to see.”

      Amazon’s answer: A robot with a camera picks out your requested items. You are in real-time conversation with it through the internet or your cell phone. You tell it you want the darker green watermelon on the left, and the large piece of salmon steak in Tray 3, if it has an acceptable expiration date.

      You may want more hands on, as would I, but I suspect that loads of people would be OK with a system like this.

      • StillWatching

        Amen, and when they see that the food exceeds their beliefs, they will continue to shop that way.

    • StillWatching

      Well reasoned on many counts, Bill, but I would caution not to jump to any conclusions until we get to see the actual business model Amazon places on the Whole Foods operation. All we can do now is speculate and I’d be willing to bet that the end result won’t resemble many of our predictions.

      Like you, I’m a loyal Amazon customer because they offer incredible service, low prices, brilliant web site functionality and all the goods I want. I was also a huge Costco fan and became pals with Jim Senegal, but those days are long gone.

  • Toni Parks

    You can’t stop progress. Development of new business methods are based on consumer choice. Yes, jobs are lost in some areas but they are gained in others. To suggest that jobs are just going away is to propagate fear. Anyone who thinks they will stay in the same job for their entire career, in this day and age, is just fooling themselves. Workers must keep their skills up to date and be ready to adapt to the changing times. Brick and mortar stores will not go away but the ability to conveniently order whatever you need and have it delivered to you right away will certainly grow in popularity.

    • Pixelvt

      I agree with you Toni, but in a way you are stating the obvious and it has always been this way. Stay current, learn, educate, you will always have a job. But I think the discussion is whether people will adopt this Amazon model. I think they will to some degree.

      But, if Amazon uses Whole Foods as distribution centers they overpaid because they are not realizing the full value of Whole Foods, which, is selling “whole food” LOL.

      Anyway I think they will succeed with this, but maybe some compromises. For example, I do like to go to Lowes when I need something around the house, say a lawn mower, or whatever. I want to see it. There are other times when I know exactly what I want, and may order it from Amazon or even Lowes for onsite pickup.

      Will Amazon kill the grocery store, I doubt it is my bottom line. For me at least, its all about convenience, and driving a mile to the grocery store on impulse to buy that “fill in the blank” is convenient.

      • StillWatching

        Bill, as I wrote earlier, let’s see what model they actually adopt before we make conclusions on its success or faults.

        • Pixelvt

          I agree, its all speculation so far, guilty as charged.

    • StillWatching

      Brilliantly stated. You are clearly the voice of reason in this matter. Wait until faulkner and his uncle Julius show up to tell you how wrong you are. Ignore them.

  • BDev

    Yes, millions of jobs are becoming automated. It is projected that half of all jobs done by humans could be automated by 2050. Machines and artificial intelligence will literally do everything better than humans can by the year 2100. Millions, maybe up to a billion people without jobs, who would have had one just 50 years previously. It’s a Very Big Deal. Sociologists are really scratching their heads about it. How much does one’s work define them, how much does what you do for income make life worth living? Suppose you simply had all the income you need, “free”? Would Universal Basic Income actually work, or would it create a massive society of slouchers who do pretty much nothing but hyperstimulate themselves with gaming, sex, entertainment and food/drink that is very tasty but horribly unhealthy?
    The UBI promoters (zuckerberg, kurzweil) wax on about the wonderful, liberating benefits of free money. Artists and creators galore. Problem is that we already have millions of people getting freebies… how’s that working out?
    Gonna be a wild ride…

    • Pixelvt

      someone has to build the robots, write the software, and all that, however I am all for free money and if you wish contact me for Paypal info, any amount appreciated

      • StillWatching

        Don’t forget my cut.

    • StillWatching

      Another one of those things that will require us to have a long discussion——– Later. Personally, I think it will all be a good thing and you can give me all of your rationalizations why “this time it’s different” as compared to all those poor horse drawn buggy manufacturers who were going to be thrown destitute onto the streets (only to be run over by cars and trucks)

      Same way I used to poke fun at the “Peak Oil” people that insisted the world would come to an end in _______ (fill in the blank) I told them that technology would give us answers that we as yet never dreamed of. Back then, oil was selling at $140 per bbl. Along came fracking (and other things) and oil today collapsed further to $44.22 per bbl.

  • Frank Penny

    True, internet sales are biting into Mall sales, but in this recession (depression, perhaps), people just don’t have the money to spend. Many folks are sadly broke. The retail “pie” is shrinking in America. The article seems to bypass this point.
    As for the new grocery stores being added, don’t worry- they will close some of them, too. Give them time.
    Shop locally whenever and wherever you can; keep local money in your community.

    • StillWatching

      Another one of the people that sees a boogeyman around every corner and makes up things to support his beliefs.

      World wide retail sales are on inexorable upward climb and are projected to maintain that climb:

      http://www.emarketer.com/Chart/Total-Retail-Sales-Worldwide-2015-2020-trillions-change/194243

      In the U.S., the picture is even rosier:

      https://ycharts.com/indicators/retail_sales

      http://www.multpl.com/us-retail-sales

      But those doomers and gloomers never let facts get in the way of any of their tales. There are just posters on this site that you have to verify everything they claim. You will come to know them all on sight and you do a public service for calling them on their nonsense.

    • Pixelvt

      It really depends on the mall. In our city we have a downtown mall that is part of a very unique shopping district, with tons of boutique stores and restaurants and bars, etc. In summer especially it draws people from around New England and the world really.

      There is major reinvestment going into that (underground) mall and it will thrive for years to come. But suburban malls are the ones largely suffering, but not everywhere. So it is risky to generalize I suppose.

      • StilllWatching

        Well stated. I can supply anecdotal evidence that is so prevalent that it rises to statistical significance, that supports your belief. Examples abound. In Salt Lake City there is a downtown mall that is thriving and one that is less than a mile away is on the verge of bankruptcy. I’m trained to ignore anecdotal evidence, but as many have observed, when it is your evidence, you tend to draw conclusions from it that are sometimes unwarranted.

      • Frank Penny

        Really? It is risky to generalize? Hundreds of malls and smaller, strip malls have closed in the NE US alone in the past 5 years. And you mention 1 place remaining open. Generalizing? (PS- Members of my family built the mall you are talking about).

  • lorenzo

    It’s one of the many reasons why I choose to live here in Ecuador. Ecuadorians don’t place as much of a priority on saving time as people do in the states. If a person’s goal is to save time, then what do they do with that saved time? I’d rather spend time at the market and interact with people (tres por un dolar), than spend time watching “Dancing with the Stars” on TV.

    • Pixelvt

      What is dancing with the stars. just kidding, but I agree with you, the only tv for me is live sports. For the record, I do not shop online to save time per se, but because I simply cannot stand going to Best Buys and Staple and the other chains compared to the Ease of Amazon.

      • StilllWatching

        Amazon Prime is a blessing. I share a yearly membership with a friend in Mississippi and it works out fine because of the great website and customer service. Stuff that Amazon won’t ship to me directly down here, I have shipped to him and he sends it via USPS to me right away. This has worked flawlessly for me for many years.

  • Devon_Nullman

    This is not a done deal – http://www.marketwatch.com/story/amazon-may-have-launched-a-bidding-war-for-whole-foods-2017-06-16 – Amazon has very deep pockets but the big grocery retailers may start bidding as well.

    • Pixelvt

      True but I would not want to bid against Amazon LOL

  • StilllWatching

    I’ll happily concede the corn. I used to get some really excellent corn, fresh just the way you describe it, right in your neck of the woods. Not in Vermont, but in Massachusetts where my grandmother lived and my mom was raised. I went for nearly 40 years with that corn being the standard against which I judged all other corn. None could equal it until I discovered a series of farm stands in Utah County, Utah and the corn from those stands was the best I had (and have) encountered in my life.

    It turns out that the guy that had the farm that supplied those stands was a very eccentric lawyer who far preferred growing his corn to practicing law. His name is Jud Harward and here is a link to his farm’s web site:

    http://harwardfarms.com/

    Harward’s corn is so sweet and delicious that you really don’t need to cook it. I do, out of habit and preference, but just enough to enhance the sweetness and to facilitate melting the sweet butter I always use. I’ve never salted food in my entire life with the exception of corn and even then, very little. Living in Cuenca as long as I have, I really miss good, sweet corn.

    As for your pork butt, recall that you were looking for that little butcher shop on Mariscal Lamar y Eduardo Crespo Malo. You never did contact me to show you the location and now I don’t believe it is still there. You know how that goes in Ecuador; “Here today, gone to Maui” as we used to say in Hawaii.

  • StilllWatching

    No harm, no foul. Speculation is a human character trait. We all engage in it.

  • LadyMoon

    I lived in Chicago 2000-2003….after I moved from a high-rise apt. to a flat in a neighborhood, the grocery store wasn’t as convenient. I ordered my groceries (meat and produce included) from PeaPod. Excellent service, produce and meat perhaps better than I would have selected….and they always gave a very nice ‘yapa’–something free. It was A-mazing!

  • Jim

    Amazon is a needed convenience. I live in Guayaquil but when I travel to the States several times a year, it’s much easier to find items online, have them sent to my friend in Weston, Florida, pick up, pack, and return. I usually don’t have time or energy to traipse through store after store looking for small things. Someone in this blog noted that we must ‘go with the flow’ of the times. I agree but still resent the intrusion of those damned cell phones (wonder why they are called CELL phones) that have addicted so many. It’s sad that the younger generations will never truly ‘smell the roses’ of life face-to-face.