Amazon's Warehouse Model Is Ideal for Grocery Delivery Program

An experienced retail pricing and promotions strategy professional, Matthew Hamory serves as managing director of AlixPartners. Matthew Hamory recently offered insight into Amazon's venture into the grocery sector in a profile for Fortune Magazine.

In the article, Hamory comments on Amazon’s recent purchase of Whole Foods and how this move will expand its grocery business and grow its paid subscription membership base. He points out that, in comparison to the typical grocery store layout, Amazon’s warehouse-based business model is a much better way of storing fresh foods. In fact, stacking random products next to each other is not only more efficient, it is also much better for fresh goods because it reduces the amount of handling these items undergo. According to Hamory, “Every time you touch a fresh product it degrades it.”

However, until Amazon reaches sufficient volume in smaller markets, it will be sourcing some grocery deliveries from brick-and-mortar Whole Foods stores. Although not ideal, this method is a good way for the company to scale its grocery delivery program until there is enough demand to build a dedicated warehouse.

For more on Amazon's efforts to expand its grocery offerings, visit fortune.com/longform/amazon-groceries-fortune-500.

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