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Amazon's Grocery Service Expansion Boosts Retail Presence

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Amazon (AMZN - Free Report) is disrupting the grocery segment of the retail sector on the back of its robust Prime, portfolio of quality products and most importantly its expanding grocery delivery services.

The company’s recent move of expanding its delivery service for natural and organic products such as meat and seafood, fresh produce and staples from Whole Foods Market to more U.S. cities namely North and Central New Jersey, Annapolis, Pittsburgh, Cleveland and Louisville is in sync with its strategy of expansion.

Further, the company made this service available in some locations of the San Francisco Bay Area. Consequently, the Prime members will now be able to avail this service at these places via Prime Now. Hence, we believe the latest move of the company will promote its Prime business and is likely to boost Prime adoption rate which in turn will drive its top-line growth.

Coming to the price performance, shares of Amazon have returned 47% on a year-to-date basis, outperforming the industry’s rally of 2.8%.



 

Expanding Grocery Services to Aid Growth

The company’s continued focus on expansion of its grocery services will aid it in rapidly penetrating the U.S. grocery space. Per a report from IGD, this space is expected to reach $1.7 trillion by 2022 at a CAGR of 3.6% between 2017 and 2022.

Amazon is ramping up its expansion plan. Apart from the latest move, the company has extended its grocery delivery service to cities like New Orleans, Oklahoma City, Charlotte, Las Vegas, Memphis, Nashville, Phoenix, Raleigh, Seattle, Tucson, Ann Arbor, Detroit, Jacksonville, Madison, Milwaukee, Omaha, Orlando, St. Louis, Tampa and Tulsa within span of a month.

Notably, these endeavors have allowed access to these services in 53 U.S. cities in total and are expected to expand to more cities in the near term.

Further, the company has also introduced grocery pickup service in Dayton, Louisville and Omaha cities. This service allows the Prime shoppers at Whole Foods to shop via Prime Now and pick up these groceries within 30 minutes by parking their car in reserved pickup spot. Currently, this service is available in eight cities.

We believe the above mentioned steps will help Amazon to reap benefits from this rapidly growing U.S. market.

Moreover, the availability of Prime Savings at all Whole Foods Stores as well as Whole Foods Market 365 stores nationwide remains a key catalyst and will continue to strengthen the company’s market position.

Deepening Retail Focus

Amazon’s strengthening retail initiatives are helping the company in bolstering its presence in the global retail space.

According to the latest report from Mordor Intelligence, the global retail industry is anticipated to witness a CAGR of 5.3% between 2018 and 2023 and to reach $31.9 trillion by 2023.

The company is expanding well in the U.S. retail space by boosting its physical presence with the increasing number of Amazon Go cashierless stores. Amazon recently announced its plans to open the third Amazon Go store in Chicago. It already has three stores in Seattle and two in Chicago.

Further, the e-commerce giant intends to take the number of its cashierless store to a record of 3,000 stores by 2021. Further, it recently established Amazon 4-star, a brick and mortar store in New York.

Additionally, Amazon just quadrupled its order for Mercedes-Benz vans to support its delivery service program “last-mile”, which is set to pick up deliveries from 75 supplier centers around the United States.

Apart from this, its international expansion in the retail space, especially in the grocery market is a major positive.

The company strengthened its presence in India’s grocery sector by acquiring 49% in the food and grocery supermarket chain, More. This is in addition to its well-performing e-commerce business.

Moreover, the company’s new Mexico site will offer food items like coffees, teas, liquors, wines, cooking ingredients and non-perishable snacks, consequently expanding footprint in the country’s grocery market.

Zacks Rank & Stocks to Consider

Currently, Amazon carries a Zacks Rank #3 (Hold).

Some better ranked stocks in the broader technology sector are EVINE Live (EVLV - Free Report) , IAC/InterActiveCorp (IAC - Free Report) and eBay (EBAY - Free Report) . While EVINE Live sports a Zacks Rank #1 (Strong Buy), IAC/InterActiveCorp and eBay carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for EVINE Live, IAC/InterActiveCorp and eBay is currently pegged at 3%, 15% and 9.53%, respectively.

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