Amazon, Samara Acquire “More” Retail Grocery Chain in India

Further its investment in India, Amazon and Indian private equity firm Samara Capital have acquired the More chain of retail grocery stores in India from Aditya Birla Group.

Samara will buy 51% and Amazon will buy 49%, to avoid regulatory restrictions that apply in situations of foreign majority-ownership. The total price was about USD $580 million. Per BusinessToday.in,

The deal will take care of ABRL’s debt that stood at Rs 4,000 crore as of March 2018. Once the process is complete Samara Capital and Amazon plan to rapidly expand the chain which was put on hold due to its burgeoning debt. They plan to set up 100-150 stores every year including neighbourhood supermarkets and hypermarkets. The plan for the current fiscal is to set up 90 stores.

Our take:

Amazon is continuing to heavily invest in India. India is a strategic growth market for Amazon, with intense competition from Walmart’s Flipkart and others. Owning (almost a majority of) a retail grocery chain will give Amazon a physical footprint through which it can accelerate the deployment of other services in the country.

Amazon Reportedly Planning on Opening Up to 3,000 Amazon Go Stores in 3 Years

Amazon is reportedly considering rapidly increasing its pace of investment in Amazon Go stores by opening up to 3,000 of them over the next 3 years. Per Bloomberg:

Amazon.com Inc. is considering a plan to open as many as 3,000 new AmazonGo cashierless stores in the next few years, according to people familiar with matter, an aggressive and costly expansion that would threaten convenience chains like 7-Eleven Inc., quick-service sandwich shops like Subway and Panera Bread, and mom-and-pop pizzerias and taco trucks. Chief Executive Officer Jeff Bezos sees eliminating meal-time logjams in busy cities as the best way for Amazon to reinvent the brick-and-mortar shopping experience, where most spending still occurs…

Amazon is targeting dense urban areas with lots of young, busy, affluent residents willing to spend a little more than a typical fast-food experience for better quality food, the people said. The target locations make it less of a threat to suburban gas station-convenience store combinations and more of a threat to big cities’ quick-service eateries, such as Subway Restaurants, Panera Bread Co. and Pret a Manger.

Our take:

  • Convenience stores have existed for a long time, but Amazon has unique data on consumer behavior and shopping patterns, and could positions its Go stores in locations it believes will be most likely to change behavior.
  • Most convenience stores are currently located at or near gas stations, and typically primarily stock candy, soft drinks, snacks, beer, and tobacco products.
  • We would view this as more of a threat to quick-serve restaurants, grocery stores, and (potentially) pharmacies.

For context, Amazon just opened its fourth Go store yesterday.

Amazon Continuing to Invest in Japanese Grocery Efforts

Last year, Amazon launched Fresh, its grocery delivery service, in Japan. Since then, Walmart and Rakuten partnered to take on Amazon in grocery delivery, though the service hasn’t launched that we’ve seen. (Walmart also owns Seiyu, a top supermarket chain in Japan, but is reportedly interested in selling it due to slow growth.)

Amazon Fresh Japan’s coverage area has been growing since launch. Initially, it covered a half dozen districts in Tokyo. Now, Amazon Fresh Japan delivers to “18 districts and 2 cities in Tokyo, 17 districts within 2 cities in neighboring Kanagawa Prefecture, and 2 cities in Chiba Prefecture.” Amazon says it delivers over 10,000 foods and daily necessities.

And Amazon is continuing to grow its Amazon Fresh Japan staff as well. Per Amazon.jobs, we are seeing several Amazon Fresh Japan listings:

  1. Senior Product Manager, Customer & Delivery Experience
  2. Vendor Manager, Grocery
  3. Brand Specialist, Grocery
  4. Buyer, Grocery
  5. In-Stock Manager, Amazon Fresh
  6. Area Manager, Fresh

Grocery is an extremely tough nut to crack, with low food prices, low delivery prices, and highly perishable inventory. We’ll be tracking Amazon’s Japanese grocery efforts as they continue to invest in this market.

Amazon Go Rollout: Store #4 Opens Today in Chicago

As we continue to track the rollout of Amazon Go stores, Store #4 opened today in Chicago at 113 S Franklin St.

It is on the first floor of the building that houses Amazon’s Chicago offices in the Loop. It is also the first Go store to launch outside Seattle, and the third to launch in the last month.

To recap, here’s a timeline of all Amazon Go launches to date:

  1. Seattle – Opened 1/22/18. Address: 2131 7th Ave.
  2. Seattle – Opened 8/27/18. Address: 920 5th Ave.
  3. Seattle – Opened 9/4/18. Address: 300 Boren Ave N.
  4. Chicago – Opened 9/17/18. Address: 113 S Franklin St.

Amazon has also posted job listings for upcoming Amazon Go stores it plans to open in New York City and San Francisco.

Large Restaurant Brands and the Future of Amazon Restaurants

Amazon Restaurants, which is live in 20 cities as of today, is looking to accelerate the growth of its restaurant supplier network by partnering with the largest restaurant brands in America.

“National restaurants play an integral role in the Amazon Restaurant Delivery business strategy,” according to a current job posting for a business development position. The listing goes on: “Amazon Restaurants is seeking an entrepreneurial, results-oriented Technical Business Development person to lead negotiations with the largest 200 restaurant brands such as Applebee’s, P.F., Chang’s, Red Robin and point of sale (POS) brands such as NCR.”

A few locations of national restaurant brands such as Subway, Firehouse Subs, Five Guys, Applebee’s, and Which Wich are already on the Amazon Restaurants platform. However, based on our review of restaurants available in each city currently, the large majority are local brands.

Last summer, Amazon announced the launch of Amazon Pay Places, a service that enables select QSRs running the Clover POS to accept takeout orders via the Amazon app. Amazon says it charges restaurants, “10% of each order that’s processed through the Amazon App. This cost covers marketing and payment processing, including fraud protection. Amazon’s marketing may include a variety of paid social media, email, and in-app marketing.” We do not yet know what the specific pricing model is for Amazon Restaurants partners.

Restaurant food delivery is a highly competitive landscape, with a slew of startups operating in the space including DoorDash, Grubhub, Eat24, Caviar, Postmates, and more – in addition of course to Uber Eats (which Uber CEO Dara Khosrowshahi said in May has a $6 billion bookings run rate).

As former Uber growth leader and current Andreessen Horowitz General Partner Andrew Chen articulated recently, the nature of transportation marketplace businesses favors platforms that can keep transportation suppliers continuously in demand throughout the day. While the nature of Amazon’s local transportation demands differ from Uber’s, it does seem generally better equipped to keep more couriers busy more often than the vertical food delivery platforms, and thus to be more economically viable, in the long run.

One potential long-term play for Amazon, given its large volume of both customer relations and inventory of perishable food in its Fresh warehouses and Whole Foods stores, is to enter the virtual restaurant business. A “virtual restaurant” is a restaurant that doesn’t exist for physical customers, but rather appears as a restaurant brand in your food delivery app only. Fulfillment can occur in a space shared with other “virtual restaurants,” perhaps also in a lower-rent location than many traditional retail establishments. Delivery logistics are thus also simplified since the number of food source locations is potentially reduced. (In some cases, restaurant entrepreneurs are creating virtual restaurants inside their physical ones in an effort to grow.)

Another potential option for Amazon long-term is to create “private label” restaurant brands with fulfillment provided by existing third party (physical or virtual) restaurants, somewhat analogous to how it has created private label products in many hardline and softline retail categories. (Given how much Amazon has already aggregated demand, it has more options than most when evaluating how to go about aggregating supply.) We have seen no evidence of Amazon’s intent to pursue either of these strategies yet, but Amazon is at least getting more sophisticated in some aspects of retail food preparation through offerings in its Amazon Go and Whole Foods stores.

For now, Amazon is racing all of its competitors to bring on as many restaurants as it can to the platform, and national restaurant brands are a fast way to gain footprint.