Amazon has emerged as a leading brick and mortar grocery player through its Whole Foods and Amazon Fresh brands. We dove into foot traffic data to understand how the company’s offline grocery ventures performed and interacted with each other in 2021.
Over a year has passed since the first Amazon Fresh location opened its doors in Woodland Hills, California. The company now operates over 20 stores throughout the United States, with the highest concentration of Amazon Fresh locations in California and Illinois. To understand how this brand is performing, we dove back into recent visit trends at some of the early locations and examined cross-shopping patterns for the brand as a whole.
The Woodland Hills, Irvine, Northridge, and Naperville locations all opened in late 2020, the Whittier and Schaumburg locations opened in January 2021, and the Fullerton and Oak Lawn locations opened in February 2021. By April 2021, the novelty wore off, so Q2 through Q4 foot traffic trends can reveal how well these Amazon Fresh grocery stores have embedded themselves into their communities.
So far the data looks promising. Between Q2 ‘21 and Q4 ‘21, visits grew for every single one of the eight stores analyzed. While part of the growth may be due to initial COVID-related capacity restrictions, the fact that store occupancy rose across the board at these early locations indicates that these venues are generating increased demand over time – a positive sign for any retailer.
While visits increased at all the locations analyzed, the change in True Trade Area size (TTA, how far 70% of a venue’s customers travel to reach the venue) exhibited more variability. Some locations, such as Woodland Hills, CA and Oak Lawn, IL, saw the size of their True Trade Area increase between Q2 and Q4, but most Amazon Fresh locations analyzed saw the size of their TTA decrease or stay the same throughout the year.
Given the fact that visits still increased, the reduction in TTA must mean that the stores are getting better at catering to local customers – and so can draw more foot traffic from a smaller area. There are a variety of factors that play into TTA size, from work from home shifts to COVID variants, so truly understanding the real reach of each location may require more time.
Whole Foods Market
Before the Amazon Fresh launch, there was Whole Foods, which Amazon acquired in 2017 as its first foray into the brick and mortar grocery space. At the time of the purchase, Whole Foods was already struggling, but Amazon saw the opportunity to turn the brand around while using its large, nationally distributed store fleet to minimize return, delivery, and marketing costs, while gaining access to troves of grocery shopping data before launching its own branded grocery venture.
Still, as the demand for – and distribution of – natural foods grew, some worried that fewer consumers would visit Whole Foods locations, and instead stock up on organic products at their local grocery stores. But while Whole Foods may have missed out on the pandemic-fueled supermarket boom, the natural grocery leader’s recent foot traffic data has proved naysayers wrong.
The brand has been slowly but steadily closing its Yo2Y visit gap, with December visits down only 5.2% when compared to 2019 – the smallest visit gap the brand has seen all year. And the company is betting on a full recovery and even planning an expansion, with “nearly 40 new stores in the pipeline” announced in May 2021.
Decreasing Competition between Amazon Fresh and Whole Foods
Cross-shopping data tells us what other stores a company’s customers are visiting, and it can reveal a lot about the analyzed company’s positioning in a given market. For the last six months of 2021, cross-shopping data shows that Amazon Fresh customers are increasingly shopping at Ralphs and Aldi, and shopping less and less at Whole Foods.
This means that competition is decreasing between Amazon’s offline grocery brands, indicating that the company’s approach to grocery is diversified and complementary. While Amazon Fresh is positioning itself as a value grocer, whose primary competition comes from grocers such as Ralphs and Aldi, Whole Foods is positioned as a premium supermarket chain that appeals to a whole different consumer base. With Whole Foods and Amazon Fresh catering to different segments, Amazon is set to strengthen its standing as an offline grocery leader in 2022.
What’s next for Amazon’s brick and mortar grocery ventures?
Visit Placer.ai to find out.