Amazon (NASDAQ: AMZN) is planning to accelerate its push into the grocery industry, according to new reports. The American grocery industry is currently an $830 billion market, with average American grocery shopping twice a week. However, only a fraction of Americans buy fresh food online. That is a problem for Amazon, notably famous for its online marketplace.
As part of its new plans, Amazon will be building new conventional supermarkets in major cities across the U.S. The company is reportedly looking for leases that will not restrict what it sells in the new stores. Each store is estimated to cost around $9 million to build.
The move comes just two years after Amazon bought niche organic grocer Whole Foods for $13.7 billion. Whole Foods does not sell products with artificial colors, flavors, or sweeteners. Unfortunately for Amazon, there are just some shoppers that are simply not interested in Whole Foods organic products.
The new stores may help Amazon capture a bigger slice of the grocery market. Amazon and Whole Foods together control about 4 percent of the market. Walmart is the current leader in the market with 21 percent of market share. Amazon shares were up 13 percent this year before the reports of the new stores emerged.
The new stores may also be a good way for Amazon to introduce its expanded lineup of food and personal care brands to a broader audience than just Amazon Prime customers. Amazon has nearly 140 of its own brands in food, health and beauty, and household essentials.
According to the reports, the new grocery stores will be separate from Whole Foods. In addition to grocery items, the new stores will also offer beauty and health items. The products offered at the new stores will different and cheaper than the products carried at Whole Foods.