Is your portfolio prepared for drive-thru grocery stores?

The retail grocery industry — a crucial commercial tenant — is facing a new disruptive force: Amazon.

The e-commerce giant has plans for a drive-thru grocery store in Sunnyvale, California, according to a report in the Silicon Valley Business Journal. If expanded, the concept could bring new turmoil to a retail grocery business already in upheaval from consolidation and changing consumer habits.

The Silicon Valley Business Journal reports a real estate developer there has submitted plans for a new 11,600-square-foot building and grocery pickup area. Amazon isn’t specifically named in building documents. However, the Silicon Valley Business Journal cites real estate sources who say Amazon is behind the project and plans a rollout of the concept that could eventually encompass multiple sites in Silicon Valley.

For several years, many companies, including Amazon’s AmazonFresh, have attempted to deliver groceries on a same-day or next-day schedule, to varying degrees of success. A common problem has been delivering fresh food to a doorstep and leaving it in a non-climate-controlled and unsecured environment.

Amazon’s drive-thru concept would be a step beyond its AmazonFresh grocery delivery service. With a drive-thru grocery location, customers could order online and pick-up in-person at a scheduled time. The concept could potentially bridge the convenience of grocery shopping online and the need to pick up food and keep it fresh.

“We are seeing the emergence of the next generation of the food distribution system,” says Bill Bishop, chief architect at Brick Meets Click, a retail and e-commerce consultancy, according to the SVBJ.

The exclusive report cites planning documents that include details of the proposed drive-thru grocery store. They include the following:

  • The concept would include both an online shopping platform and traditional brick-and-mortar retail.
  • Customers will pre-order grocery and other items, then choose a 15-minute to two-hour pickup window.
  • The building would be constructed as a warehouse and include loading stalls for eight cars.
  • Shoppers could also arrive on foot or via bicycle and shop inside the store.

Grocery stalwarts such as Wal-Mart and Safeway, among others, have been piloting and expanding curbside pickup for groceries ordered online. However, Amazon’s expertise in e-commerce and automated order-filling could seriously challenge those offerings.

If an Amazon drive-thru service proved successful and the company decides to embark on a major expansion, it could create numerous opportunities for commercial real estate developers and investors.  Of course, a successful neighborhood Amazon grocery drive-thru could also dent the profitability of traditional supermarkets and give their landlords and investors heartburn.

“It would put more competition on (traditional grocers) because now we have a new format,” Kirthi Kalyanam, director of the Retail Management Institute at Santa Clara University’s Leavey School of Business, told the Silicon Valley Business Journal. “Where the rubber is going to hit the road is: Can these new locations be more convenient to customers than a Safeway? If the answer is yes, There will be some restructuring in the grocery industry.”


Adam O'DanielBy Adam O’Daniel | Editor | QuietStream Financial Insights