The retail sector in the United States is going through a huge transformation phase, where things have gotten so tight that only the fittest will survive. The NY Post reported yesterday that BJ’s Wholesale Club has put itself up for sale, and Amazon may be interested in buying the retailer, which has a significant presence in the Northeast. This news comes after reports of Jeff Bezos’ company pondering over buying WholeFoods, a grocery chain with more than 400 stores across the country.
Amazon put a huge squeeze on Walmart by slowly eating away marketshare in the United States retail market. Walmart responded in kind, by moving aggressively into the e-commerce segment while at the same time trying to exploit its physical store network advantage. With groceries being Walmart’s strongest point, Amazon is facing a credible challenger in the form of Walmart, and Amazon is seriously running out of time to crack the grocery code.
Amazon recently announced a new concept called AmazonFresh Pickup, which allows customers to place orders online and drive down and collect their order. The first location is expected to be in Seattle, and if things go well Amazon will slowly add more physical locations to the list.
But how long will they need to open 1000 or 2000 stores across the country? Does Amazon really want to give that much time to Walmart to encroach into their e-commerce territory? Building out their own stores is what Amazon would have ideally liked to do, but it’s a cumbersome process, and one that will take a lot of time to get the level of penetration a company like Amazon would need.
An acquisition will certainly help the online retail and technology giant quickly expand its store count and take Walmart head-on in the grocery segment, and that’s possibly the reason why suddenly we keep hearing about the company being in talks with this company or that company.
The problem is, Amazon is still not very clear on how it wants to go after the grocery market. They know that they need to get into it but, even after spending so many years pondering over it, they are still in the trial and error phase. The more this gets delayed, the higher the odds of an acquisition, in our opinion.
At 1redDrop, we think Amazon will buy its way into brick and mortar space sooner rather than later, simply because they are running out of time.
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