Amazon just gave a big signal that it's going to step up its grocery business, and it could be a wake up call for competitors like Albertsons and Kroger
- Amazon added "companies that sell grocery products online and in physical stores" to its group of competitors for the first time in its annual filing on Friday.
- The update suggests Amazon thinks its grocery business is big enough to be considered a competitor to traditional retailers, like Albertsons and Korger.
- It's unclear how exactly Amazon's grocery business is doing, but its CFO Brian Olsavsky said orders from its Amazon Fresh and Whole Foods businesses more than doubled last quarter.
- Updates like this could serve as a wake up call for competitors, as it did for FedEx CEO Fred Smith last year.
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Amazon made its first major move into the grocery space in 2017 after buying Whole Foods for $13.7 billion.
Now, Amazon is making it clear that its grocery business is big enough to be considered a competitor to other grocery stores, like Albertsons and Kroger.
In its annual filing on Friday, Amazon added "companies that sell grocery products online and in physical stores" to its group of competitors for the first time. Other competitors listed include, but are not limited to, publishers, retailers, and logistics companies.
The new language suggests the growing importance of Amazon's grocery business, and that it should be taken as a more serious threat to traditional supermarket businesses. It also underscores Amazon's ambition that goes far beyond just online shopping, as it looks to expand into more areas of physical retail.
"The bottom line is that Amazon's addressable market is retail, not online retail," Andrew Murphy, managing partner at Loup Ventures, told Business Insider.
Amazon's representative declined to comment.
The change is made as Amazon is doubling down on its grocery business. Last year, Amazon got rid of the $14.99 fee for its grocery delivery service, Amazon Fresh, and made it a free perk for its Prime members, which it said this week now number 150 million. The company is also planning to launch dozens of new non-Whole Foods branded grocery stores in the Los Angeles area, according to the Wall Street Journal. Meanwhile, the number of its cashierless Amazon Go convenience stores, which sell quick bites and some grocery items, nearly tripled to 25 last year.
Wake up call
It's unclear what exactly may have prompted Amazon to add this line now, more than two years after buying Whole Foods. Still, when a new update like this comes from Amazon, it could sow fear in competitors and serve as a wake-up call as to the online retail giant's broader ambitions.
For example, when Amazon mentioned companies in the "transportation and logistics services" as a competitor for the first time in last year's annual report, FedEx CEO Fred Smith didn't take it lightly, he told the Wall Street Journal.
"They had never done that before that day," Smith said in an interview with the Journal. "So we took it seriously."
During Thursday's earnings call for its fourth quarter earnings report, Amazon's CFO Brian Olsavsky briefly highlighted the growth in its grocery and Whole Foods businesses. He said that grocery delivery orders from both Amazon Fresh and Whole Foods "more than doubled" in the fourth quarter year-over-year, but declined to share more details.
Sales from Amazon's physical stores segment, primarily made up of Whole Foods, declined for the second straight quarter to $4.4 billion. Olsavsky said the drop is primarily due to a shift in shopping behavior, as more people order online deliveries and in-store pickups, which get recorded under Amazon's online stores sales instead of its physical stores segment.
"We're seeing a lot of success in home delivery of groceries, and that's where a lot of the Whole Foods growth has been," Olsavsky said during a call with reporters.