If Amazon.com Inc (AMZN.O) hopes to revolutionize grocery delivery, then its bid to buy Whole Foods Market Inc (WFM.O) for $13.7 billion will be just the start of a long and costly process.
The e-commerce giant would need to add a large network of specialized grocery distribution warehouses, former AmazonFresh employees and logistics experts said. This is something Wal-Mart Stores Inc (WMT.N) and other competitors have already done. Whole Foods, with a relatively small distribution footprint of its own, does little to change the picture for Amazon, they said.
Amazon has a little more than 3 million square feet of U.S. warehousing dedicated to its existing AmazonFresh and Prime Pantry grocery programs – a tenth of the warehouse space Wal-Mart has for specialized food distribution, according to logistics consulting firm MWPVL International Inc.
“AmazonFresh really was for lack of a better word an after-thought,” said Brittain Ladd, who until March was a senior manager for the grocery delivery program, which launched in 2007.
One key to Amazon’s success in general retail sales has been its speed in delivering products to consumers, facilitated by warehouses located strategically throughout the United States. As of 2016, the company had about 100 million square feet of space in its fulfillment and data centers, some of it outfitted with state-of-the-art robotics to boost efficiency.
Facilities for distributing fresh food are far more complicated than ordinary warehouses. A single facility can need a half dozen or more temperature settings to house products from Popsicles to berries. Some require certification from the U.S. Food and Drug Administration, and extra care must be taken to keep shelves clean and prevent pests from contaminating food.
Whole Foods has over 1 million square feet of warehouse space for distribution to its markets, and a chunk of its inventory goes straight from suppliers to stores, MWPVL said.
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