Viva France: Amazon & Casino Group Announce Partnership

Amazon took a significant step in growing their foothold in the grocery market in France by announcing a partnership with Casino Group on Tuesday. The strategic deal will integrate Amazon pickup lockers into Casino owned grocery store locations. This will allow for customers to order products on Amazon and then pickup in the store.

Amazon will also start carrying more of the grocery products carried by Casino and their stable of grocery store chains. The agreement will also allow for Amazon to expand their Prime Now grocery delivery service, which they began with Monoprix (Casino Group’s grocery store chain which is comparable to a French version of Whole Foods) in Paris with great success. The delivery service will expand beyond Paris into surrounding areas in the next twelve months.

The Casino Group is currently in the middle of a cost cutting scenario which has fueled speculation that the chain might be poised for a consolidation with Amazon. These types of business deals could potentially lay the groundwork for that type of scenario to take place. The company is one of the largest retailers in France with grocery stores under the names: Hyper Casino, Casino Supermarche, Leader Price, Vival, Monop, Monoprix, and Spar among others.

The retail grocery business in France is the third largest market in the E.U. behind the United Kingdom and Germany. However, Amazon has a very small share of the overall market in France with some estimates around 17% of the retail grocery channel business.

Amazon has made the strategic business direction of entry into the grocery channel a priority. A recent post on this site detailed the online retail giant’s decision to launch brick and mortar grocery stores besides Whole Foods, to compete with the mainstream retail grocery players in key cities as a test market for the concept.

Amazon could be making a play here for Casino Group to enter the French grocery market more aggressively. That would certainly have an impact on that business and would benefit the consumer with lower costs on many products because the other players would have to compete with Amazon on price.

Amazon is currently the dominant ecommerce player in France and this agreement with Casino Group will strengthen that position for them and allow for some new conveniences in the shopping experience for the French consumer. The Casino Group, in their press release, indicated that the partnership will allow them to reach a wider demographic of customers as well as provide customers with an enhanced service.

This partnership, if proven successful, could be a harbinger of things to come with Amazon potentially looking into similar agreements with major grocery retailers in Germany and the UK in the months ahead.

It will remain to be seen if Amazon does present a formal bid to purchase Casino Group, and how that scenario would be perceived by the French government regulatory personnel and the public at large.

In my view, it could be seen as another disconcerting way that Amazon is growing to have too much control over many areas of industry. It is getting to the point that it could be very problematic for several key areas of industry throughout the world if Amazon failed at some point. That should give society some cause for seeking a pause on some of their growth activity.

They do provide the consumer with a great service, and they are efficient at what they do in the ecommerce area, but they are pushing their influence into everything and that should at least cause us to start to question where this will all eventually lead, and the possible ramifications of a single company growing to that level of influence.

(Some background information and statistical data provided by CNBC, Yahoo! Finance, and Reuters)

Amazon Grocery Store Plan: Will It Help Or Hurt Retail?

Amazon recently announced a plan to expand into the retail grocery channel beyond their current presence resulting from their acquisition of Whole Foods. Many people know that the internet shopping giant bought Whole Foods for about $14 billion in June 2017, which provided them with a foothold into the grocery business.

The image of Whole Foods from the consumer standpoint is that it is an expensive, almost elitist place to shop for groceries that many in the general public feel they can get a better value at a mainstream grocery chain. Amazon attempted to alter this consumer sentiment around Whole Foods, but when those were unsuccessful, this could have at least contributed to their decision to enter into the retail grocery business in a way that will reach a wider gamut of consumer demographics.

The plan is to open stores in targeted U.S. markets with just a few outlets in each market to test out the concept. The first Amazon grocery store of this type will open in Los Angeles as soon as the end of 2019, if everything goes as planned.

Then, the concept would be rolled out to ten or twelve strategic geographic areas throughout the country. The new grocery brand would sell less expensive products than Whole Foods, would carry a large selection of Amazon’s private label brands, and would carry national brands that are precluded from the Whole Foods shelves based on the food product standards set by that chain.

The decision to carry those national brands would open up a pathway for Amazon to benefit from the huge amounts of money that those companies spend for shelf space and advertising at Point of Purchase type of campaigns. The new grocery brand would also provide Amazon with a way to enroll more people in Prime memberships with some sort of promotional incentive either at the point of enrollment, or for future shopping trips.

Currently, Amazon provides a 10% discount for Prime members when they shop at Whole Foods store locations. This will serve as a model for the new grocery brand in order to incentivize memberships to their Prime service. Amazon will also be able to cross-promote more items from their website during an in-store shopping experience.

Furthermore, Amazon announced in the plans for this new grocery brand that they will have a service that allows shoppers to select the items on the website and set it up for pick-up in the store location, creating what Amazon believes will be the new way that the consumer purchases groceries.

The decision will have a gigantic ripple effect on the grocery industry. The established retail grocery chains are going to have to lower their overhead costs prior to Amazon entering their industry space. That could translate into job cutbacks, layoffs, or restructuring the number of full-time workers or hours that are given out by the mainstream grocery players. The one controllable aspect of a low profit margin business such as the grocery channel is the labor cost.

The other significant component to this news by Amazon is that they are looking to lease spaces that also allow them to sell beauty and personal care products. Those types of products generally have a higher profit margin, and Amazon has their own private label brands which allow for excellent cost control.

My past writing on the food industry and the retail shopping changes that have taken place over the years have centered more on certain chains going bankrupt or discontinuing a product due to a recall or sluggish sales. This situation is rare: a new player actually joining the brick and mortar segment of the retail landscape.

The timing for Amazon is advantageous too because of the amount of large retail spaces that are vacant now with the end of Sears, Toys R Us, and a slew of regional grocery chains. The speculation is that Amazon could lease some of the former Sears locations for this new grocery store concept.

In the Northeast and Mid-Atlantic states, the amount of retail space left from the demise of regional grocery chains such as A&P and Pathmark, create a huge opportunity for Amazon to get an advantageous lease term. Then, they can reach a huge variety of demographics in that part of the country which is so densely populated.

The industry data on the grocery business in America is compelling and certainly has been on the radar screen for Amazon for a while now. The U.S. grocery business is estimated at $830 billion and between Whole Foods and Amazon’s other online business they have a 4% market share. Wal Mart has a 21% market share of the grocery business, and Amazon is looking to grow their share and get in front of mainstream consumers with their private label brands.

The competition will face some very difficult pricing pressures from Amazon entering this part of the industry, should the concept launch be successful. There are many people both in the consumer public and on Wall Street that believe that the competition will be good for the grocery industry.

Amazon entering that mainstream grocery retail space will force other grocery chains to innovate and provide new and better value propositions to their customers. The consumer stands to benefit from that standpoint.

The success of this venture will be evaluated by Amazon in the test markets that they have announced: LA, Chicago, Philadelphia, and others. The full rollout of a new grocery chain from Amazon would help solve for some of the unoccupied retail space in shopping centers around the country. It would bring brick and mortar business back within the context of a changing consumer landscape.

The outcome of this new venture is uncertain, but one thing is clear: all eyes are again on Amazon to see if they can put their stamp on a new way for consumers to shop for groceries.

(Some background information courtesy of Forbes and The Wall Street Journal)