Amazon (NASDAQ: AMZN) is the sort of company that likes to have its hands in everything. In late 2020, it launched Amazon Pharmacy, a move that's already shaking things up for shopping center mainstays like Walgreens (NASDAQ: WBA) and CVS (NYSE: CVS). And while many cities rely on Amazon to create jobs at its numerous distribution centers, through the years it's also been the death knell for many local businesses.
It may therefore come as a source of relief to some grocery store operators to learn that Amazon has made the decision to discontinue its Prime Pantry service. Launched in 2014, Prime Pantry allowed shoppers to order shipments of nonperishable food and household items. Initially, the service was only available to Prime members, but Amazon then added a $5 monthly subscription option for all customers in 2018.
Pulling the plug on Prime Pantry means physical grocery stores may have less competition when it comes to the purchase of dry goods and household essentials. But when we dig deeper, this news is more of a mixed bag.
Amazon's threat is still real
Though Amazon may cease to offer its Prime Pantry service, it has no plans to exit the grocery space anytime soon. Quite the contrary -- Amazon may now choose to divert more resources to other grocery-related ventures, like increased shipping options for Whole Foods orders and expanding its line of physical Amazon Fresh stores. Further, in September 2020, Amazon launched its first online-only Whole Foods Market in Brooklyn, New York. The store doesn't welcome shoppers, but it does lend to faster delivery in an extremely saturated market, and there's a good chance it'll be the first of several, if not many.
In fact, it's easy to see why Amazon opted to get rid of its Prime Pantry service. For one thing, customers can still order most of their Pantry items through the site without being subject to minimums. And this way, Amazon can focus on being a one-stop grocery shop for consumers, whereas Prime Pantry was limited to nonperishable goods that may serve as household staples but can't take the place of fresh items.
The Millionacres bottom line
Should grocery retailers be worried about Amazon's plans? It depends on the extent to which Amazon expands. If Amazon's offerings are appealing and robust enough to displace physical stores, it'll drive major chains to shut down locations, potentially a major blow to the shopping centers (and their commercial landlords) that rely on supermarkets to serve as anchor tenants.
In fact, as a general rule, when Amazon enters a new space, whether it's medication, food, or something else, there's always, at the very least, an underlying reason to worry. For the sake of shopping centers and the people who invest in them, let's hope this latest news doesn't cause too heavy a disruption, especially in the near term. Countless stores have closed their doors in the course of the coronavirus pandemic, and shopping centers simply cannot afford to lose additional tenants. Whether that happens due to Amazon or other retail power players is yet to be determined.