Same-Day Facilities Key to Amazon's New Powerful Grocery Strategy

After about a year of going underground and not drawing too much attention to its retrenchment in the grocery category, it's clear to me what happened. Amazon went back to basics and focused on "what makes Amazon, Amazon." In other words, the flywheel.

Gone are the days where you are hearing about a nationwide physical footprint rollout, essentially learning grocery from scratch within Amazon through an endless series of hires with ultimately questionable results.

In a world where I've lost count of the number of Amazon grocery and convenience store strategy shifts, Amazon has quietly put together a string of wins in grocery.

Let's start with the scoreboard to Walmart:

Amazon in their last earnings report said they have over $100 billion of gross merchandising sales in the last 12 months from grocery (even excluding Whole Foods). Walmart might be what, 3x this number? (ChatGPT's best guess given available figures)

Here's what I see that has been different since Tony Hoggett exited stage left.

* Seemingly abandoning most of their new Amazon Fresh/Grocery formats.

* Expanding what is available at Whole Foods both in-store and delivery/ship from store using both micro-fulfillment and same-day facilities.

* Unifying its cart and supply chain into one, allowing perishables and traditional shelf-stable Amazon grocery selection to appear in one cart

* Focus on same-day facilities to drive grocery adoption - speed = frequency = sales. This is the Amazon playbook.

* Perishables are now coming from same-day faciltiies.

So how many same-day facilities are there? Same-day grocery now serves over 1,000 cities. But by the end of the year, same-day facilities will serve 2,300 cities.

Although Walmart has about 4,500 stores, guess how many cities Walmart serves? About 2,600.

According to reports, there are about 100k SKUs in a typical Amazon same-day facility, and obviously much more than grocery since they are designed to serve all Amazon, but it's a start. (Walmart Supercenters have ~140k SKUs, but a lot of grocery)

Amazon scale could still yet disrupt online grocery, given enough time and patience. Physical retail will remain dominant for a long time, but a lot does depend on how long online grocery will keep outpacing physical grocery growth by 3-5x a year (depending on which estimate you read).

Owning a big chunk of the industry's growth is not a bad strategy whoever you are. And Amazon's own playbook could accelerate the trend. Just by executing the basics. Delivering faster, creating more habits, expand selection and same-day facilities. Repeat.