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Bloomberg reports that Amazon-owned Whole Foods is looking to open larger stores as it expands, with the desire to use the extra space as small distribution centers that can help it fulfill orders placed on Amazon’s site.

In addition, the story says, “Whole Foods is … working with Regency Centers Corp., one of its largest landlords, on a project to convert parking areas at existing stores into stalls for Amazon delivery contractors to load up their orders.”

According to the story, “Amazon’s investment in physical retail is partly designed to lift the online shopping business. The company began rolling out two-hour delivery of groceries from Whole Foods stores in the U.S. last month. It currently maintains separate warehouses for orders of non-grocery items. Combining them could help Amazon cut costs and deliver goods more quickly. The plan would more deeply integrate the business Amazon acquired last year for $13.7 billion.”
KC's View:
Not surprising, and completely logical … especially as Amazon tries to find ways to drive down its fulfillment costs even while playing a great role in the delivery part of the customer experience. (We have a story about this below.)

In the long run, I suspect, we may see Amazon/Whole Foods reducing the center store footprint and, as appropriate, expanding the backroom sections of these stores. It’ll make sense, as customers order packaged products online, and look to use the bricks-and-mortar store for fresh purchases.

This will, I think, create challenges for the competition, as the savvy companies consider ways they can rationalize their space even while figuring out how to control more of the process where they can. Less savvy companies won’t get it, and will miss the wave, risking irrelevance.