Amazon Fresh grocery stores are 'closer to a conventional grocer'

A new Morgan Stanley analysis says Amazon's Fresh grocery stores are roughly 9% cheaper than Kroger-owned Ralphs stores. The real value of Fresh stores may be in its role as a grocery fulfillment center, it says.Amazon is positioning its nascent Fresh grocery stores to look more like a conventional grocer than a pure discounter as previously thought, according to Morgan Stanley.

According to a note published on Wednesday, Morgan Stanley found that Amazon Fresh was roughly 9% cheaper than Ralphs, with 20 out of the 30 products compared having a lower price tag than at the Kroger-owned supermarket. While the difference shows the grocery industry's ruthlessly competitive nature, the price gap itself isn't big enough to consider Amazon's push into grocery as that of a pure discounter, the note said. Instead, Amazon may be setting itself up as an on-par competitor with national chains.

"Our sense is AMZN is positioning the Fresh banner somewhere between a discounter and a true full service conventional grocer, though closer to a conventional. This makes sense as Fresh stores are opening in densely populated, primarily urban markets and appear to be targeting a squarely middle income customer who may shop at both discounters and conventional grocers already," Morgan Stanley wrote in the note.

"Fresh stores average 35-40k square feet, while typical conventionals are 50-65k square feet. Similarly, Fresh stores reportedly stock ~15k SKUs, while conventionals stock around 30-40k. The store we visited had some Amazon-like flourishes — including plenty of 365 private label products and the highly publicized Dash carts — but nothing that radically reimagines the typical grocery store, at least not at first glance.

Like I said. I concentrate on my work.

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