Amazon, the e-commerce giant raising more fears of its monopoly powers with its new plans to open grocery stores around the country, says it’s far from becoming a monopoly and instead faces an intense rivalry in the retail sector and will be dwarfed by grocery chains like Kroger and Walmart.
“There is an important difference between horizontal breadth and vertical depth,” Amazon said in a statement to the Washington Examiner. “We operate in a diverse range of businesses, from retail and entertainment to consumer electronics and technology services, and we have intense and well-established competition in each.”
The company founded by Jeff Bezos said it has captured only about 4 percent of the $2.7 trillion U.S. retail market to date and about 1 percent of global retail.
Its grocery initiative, which calls for opening dozens of stores in major U.S. cities starting with Los Angeles, was revealed in the same week that the Federal Trade Commission announced a task force of 17 attorneys to police competition in tech markets like Amazon’s.
Amazon has a market value of $833 billion and briefly topped $1 trillion last year, but it’s far from dominating the grocery sector. Not only is the grocery market fiercely competitive, both Kroger and Walmart have thousands more stores, said one source close to the company.
Whole Foods, for instance, had only 500 locations when Amazon bought it, while Kroger had 3,900 stores as of January 2018. Walmart currently has 5,300 U.S. stores and offers pickup of groceries purchased online at 2,100 of them.
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Morgan Stanley analyst Brian Nowak agreed that Cincinnati-based Kroger isn’t yet fazed as Amazon starts “flexing its muscles” in the same sector.
Kroger has been working for five years to develop digital services that make shopping easier for its customers, and most of the people who use that option still come into bricks-and-mortar stores and spend higher amounts overall, CEO Rodney McMullen said on an earnings call Thursday.
“The thing that we’ve had for years is we have 460,000 associates out there that are just, every day, working hard to serve our customers and each other, the quality of our fresh product continues to get better and better, and it’s a competitive advantage,” he added.
Combined with the company’s physical stores, such strengths will keep customers coming back “for an experience they can’t get somewhere else,” McMullen said. “Very excited about where we are.”
