For years, Amazon (NASDAQ: AMZN) has slowly but surely been encroaching on the grocery space. And that's not necessarily a bad thing for real estate investors.
Amazon's expansion into physical grocery stores gives shopping center operators more rental income to look forward to. And while Amazon could threaten existing grocery chains to the point where stores are forced to shutter, it may also come in and replace closed supermarkets with its own stores instead.
Of course, one hallmark of Amazon is its ability to be successful at just about everything it does. And physical grocery stores are no exception. In fact, Amazon is clearly so confident in its grocery store offerings that it's willing to have two of its own properties compete with each other.
A surprising move
Back in July, Amazon opened another Amazon Fresh location in Washington, D.C.. What makes Amazon Fresh unique is that consumers can shop to their hearts' content and skip the checkout line. Instead, they're able to pay for their purchases using a special QR code that's tied to their existing Amazon accounts.
Not only is that option extremely convenient, but it lends to fewer health concerns at a time when we still have a raging pandemic on our hands. While consumers may have a relatively easy time avoiding close contact with fellow shoppers in most grocery aisles, distancing at the checkout line is more difficult.
But what's surprising about Amazon's latest store placement is that its new Amazon Fresh location is only 0.3 miles away from an existing Whole Foods Market, which the retail giant also owns. For the average consumer, that translates to a six-minute walk between the two locations.
At first glance, that might seem like a silly move on Amazon's part. But when we dig deeper, it actually speaks to how confident Amazon is in each store offering.
Amazon Fresh is designed to streamline the food shopping experience. It's an ideal setup for customers who are in a rush and want to get in and get out.
Whole Foods tends to cater to a different audience. Its product line tends to consist of more organic (read: expensive) items, and shoppers who frequent the store may be more apt to pay closer attention to labels. Or, to put it another way, Whole Foods won't necessarily be a draw for the "get in, get out" shopper. Rather, it's designed for consumers with generous grocery budgets who prioritize the quality of their food above convenience.
It's for this reason that Amazon may be able to pull off having two stores in such close proximity -- not just in Washington, D.C., but in other cities as well. And that may actually be good news for real estate investors.
Right now, shopping centers are still looking to fill the void left by pandemic-related vacancies. The fact that Amazon doesn't seem too concerned about having its two store brands in close proximity means commercial landlords may have an easier time getting the online giant to sign leases as it opens more physical locations.