Shopping Center Business

MAY 2018

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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GROCERS May 2018 • SHOPPING CENTER BUSINESS • 259 W hen Amazon finalized its pur- chase of Whole Foods Market on August 28 of last year, the deal set off waves of activity across the grocery industry. The e-commerce giant was long rumored to be interested in making a move to get into the brick and mortar grocery sector, with some analysts correctly speculating it could buy Whole Foods. Still, the news proved to be an immediate game changer in a sector still largely dominated by regional brands. "Before Amazon acquired Whole Foods, grocers were expecting the com- pany to build a supply chain the same way they had for non-grocery items," says Gar- rick Brown, Cushman & Wakefield's na- tional retail research director. "We didn't see a sense of urgency from other grocers until Amazon pulled the trigger." With the trigger now pulled, major grocery players are ramping up their own innovations, attempting to stay ahead of Amazon. Several are now testing or pro- moting online grocery ordering and/or grocery delivery services, and pushing for more experience-based concepts such as in-store cooking schools and bars to keep customers engaged. One other effect of Amazon's Whole Foods move could be its impact on commercial real estate. If shoppers begin ordering groceries online the way they have done with other retail categories, what are the implications for the strength of grocery-anchored centers? Separately, Amazon could impact com- mercial real estate simply by increasing the number of Whole Foods stores. The grocery chain utilizes a relatively small footprint of roughly 460 locations, while Kroger operates nearly 3,000, Albertsons/ Safeway has about 2,300 and Ahold Del- haize has about 2,000 in the U.S. The large gap between the size of Whole Foods and its competitors may shrink over time. "Amazon has been clear that they want to compete against the biggest grocers," Brown says. "To go head to head with players like Kroger, Walmart and Albert- sons, they'd need to add at least 500 new stores, and I think there's plenty of room for it to achieve that 1,000-unit mark with- in Whole Foods' traditional urban and dense suburban markets. I wouldn't be surprised to see 500 new Whole Foods stores within the next five years." Brown and others have speculated that some new Whole Foods locations could backfill former Toys "R" Us stores. The Grocery Chains Embracing Tech Supermarkets are evolving to offer online ordering and delivery options — and it could affect real estate. Haisten Willis Amazon lockers at the Whole Foods store in Denver's Union Station. Whole Foods Market at Union Station in Denver. One of the attractive features of Whole Foods to Amazon was the company's urban locations in densely populated markets. Credit: Georg Beyer Credit: Georg Beyer

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