Amazon’s New Head of Real Estate Joined from Discount Grocery Chain Save-A-Lot

In what could be another signal that Amazon is planning to develop a new chain of physical grocery stores, we have learned that Amazon recently hired a discount supermarket veteran as its new Head of Real Estate.

Patrick Waldron joined Amazon in September according to his LinkedIn profile, though Amazon has not officially announced his hiring that we have seen. Previously, Waldron was Vice President of Real Estate and Business Development at Save-A-Lot Food Stores, a discount grocery store chain with over 1,300 locations in the United States, primarily east of the Mississippi. Prior to Save-A-Lot, Waldron was Vice President of Real Estate at discount supermarket chain Lidl (US), where he worked for several years, moving to Save-A-Lot shortly after Lidl opened its first US stores. Today, Lidl operates about 65 stores in the US, also mainly in the eastern states (and thousands more in Europe).

Save-A-Lot stores are typically smaller format than major US supermarkets. While Save-A-Lot stores carry national brands, they also carry many of the company’s own private label products across a variety of categories. Save-A-Lot has also grown through a licensing model in which it acts effectively as a wholesaler to its local licensees. In 2016, the company was sold by Supervalu to current private equity owner Onex for $1.37 billion.

In addition to competing with traditional grocery stores, discount grocery chains in the US like Save-A-Lot are also increasingly competing with general merchandise dollar stores like Dollar General, Dollar Tree, and Family Dollar. While these stores typically do not carry fresh food, they are increasingly allocating square footage to frozen food in addition to non-perishables — and are also often located in the same or nearby shopping centers.

“Smaller formats are driving retail success. It’s the perfect storm for retail and private label,” Waldron said in an interview with Chain Store Age last year (while still at Save-A-Lot). “The physical experience has to be convenient, which is why Lidl, Aldi, and Dollar General are doing well.”

Above: A Save-A-Lot store in Amherst, OH. Source: Save-A-Lot (undated), via Google Images.

Last week, the Wall Street Journal’s Esther Fung and Heather Haddon reported that Amazon is planning to open “dozens of grocery stores in several major U.S. cities” that likely won’t compete with Whole Foods and may or may not incorporate the Amazon brand. Amazon’s hiring of Waldron could be seen as evidence that Amazon is interested in developing a new type of grocery store chain.

Those we spoke with in the grocery industry said they are generally expecting Amazon to proceed with a new type of chain distinct from its current physical retail grocery stores.

While Amazon has largely kept prices at Whole Foods in check since its acquisition a year and a half ago, the idea of adding a new brand of stores with more selection and lower prices would enable Amazon to eat into a larger share of the US grocery market, which has overall proven a tough nut to crack for Amazon over time. Whole Foods stores are generally located in higher-income areas, and Whole Foods’ standards prohibit it from carrying items that contain anything on its “Unacceptable Ingredients For Food” list.

Eliminating that restriction would allow a new brand of Amazon-owned grocery stores to carry a wider selection of products and brands. Of course, Amazon would still face the challenges of the traditional grocery market. Nevertheless, more grocery stores would also enable Amazon to expand its Prime Now footprint for fast delivery of fresh items, and expand its network of pickup locations. We would also expect such a chain to carry a high portion of Amazon “Our Brand” items.

Another potential angle here is pharmacy. Whole Foods stores don’t have pharmacies, but many of the larger grocery stores in America do. We believe Amazon is investing substantially in its online/mail-order pharmacy distribution infrastructure, and having a network of local pharmacies would both complement its online pharmacy and offer a network of local mini fulfillment centers for quick delivery.

Regardless, Amazon could potentially apply technology currently deployed in its Amazon Go stores to a new, larger format environment. Compared to traditional grocery stores, such a store could lead to higher customer satisfaction through automated checkout while also potentially delivering higher revenue per square foot for Amazon.

Between its Whole Foods Markets, Go, Books, 4-star, (for now) pop-ups, and more, we are tracking over 600 Amazon physical retail venues today. It is looking increasingly likely that that number will grow in the coming times.

Subscribe to TJI

TJI is uniquely focused on Amazon. A TJI subscription includes access to our latest information and data about Amazon.

TJI Research provides a comprehensive picture of changes happening across Amazon’s businesses through a combination of primary research and our assessment of new information from around the world.

Choose the subscription plan that best fits your needs.

Share