Amazon's Drive Location ­
An Inside Look Amazon is reportedly opening a standalone drive format location in Sunnyvale, CA Through this store, Amazon is looking to gain access to grocery sales outside of urban centers Reports suggest that Amazon may open multiple drive locations in Silicon Valley, although there is no official confirmation that this new location actually belongs to Amazon Check out renderings and filings from the construction project here

 Amazon is reportedly building its first drive format in Sunnyvale, California. This store would allow shoppers to order groceries online, select a small pickup window, and receive the groceries at one of 8 pickup lanes without exiting their vehicles. The inside of the space would be inaccessible to shoppers, except for a small area that will likely serve as a customer service counter. This inaccessibility allows Amazon to optimize the layout for grocery picking, decreasing picking times and therefore cutting costs. Amazon would not be the first major retailer to develop a standalone drive format; Walmart has operated its standalone drive since September of last year.

Is Amazon the Retailer Behind This Development? While the Silicon Valley Business Journal reports that this will serve as just one of many Amazon drive formats in the area, there is yet to be any confirmation that Amazon is the business behind this location’s development. One source points to Amazon as the likely tenant, but there is a tendency for news publications to jump to conclusions around Amazon expanding its physical presence. See “Amazon to Buy RadioShack Stores” and “Amazon to Open Physical Store in NYC” as just two examples of overly eager and incorrect headlines. Additionally, there is no lack of retailers in the area that may be interested in opening a drive format. Both Walmart and Target operate offices in Sunnyvale, and Walmart already has experience managing its standalone drive format in Bentonville. However, the company that filed the public documents for the construction of the drive store names Amazon as one of its major corporate clients. This, coupled with the source of the article insisting that Amazon plans to open multiple drive formats in Silicon Valley makes Amazon’s involvement plausible (and somewhat likely), although far from confirmed. The Amazon Drive Location: 7/29/2015 Amazon's Drive Location ­

An Inside Look http://www.retailnetgroup.com/research/post.aspx?id=89979 3/4 Located at 777 Sunnyvale Saratoga Road in Sunnyvale, CA 11,600 Square Feet (Walmart’s drive format is 15,000 sq. ft.) 8 pickup lanes Small shopper­accessible in­store area likely for customer service Formerly an Orchard Supply Hardware Click here for links to more renderings and filings from the construction project.
 Implications for Amazon: Gains access to shoppers outside of urban centers that are already covered by AmazonFresh Increases share of online grocery market, particularly as Walmart ramps up the implementation of curbside grocery pickup Offers shoppers more flexibility around fulfillment methods and timing Removes costs of last­mile logistics for both Amazon and shoppers

While this format could make sense for Amazon, one of the benefits of being an online grocer is that one avoids investing in expensive real estate. Where store­based retailers like Safeway and Walmart need to pay for extremely expensive physical locations, Amazon is able to operate its Fresh warehouse in less expensive areas and simply drive deliveries into the high­price zip codes. Through the drive model, Amazon will be saving on delivery fees but dramatically increasing its investment in real estate. Implications for Retailers: Grocers must be prepared for increased pressure from online grocery as Amazon looks to compete more aggressively on convenience The past few months have seen many major players begin trialing grocery pickup from their stores, and it is likely more retailers will begin to look at the standalone drive format in order to optimize the picking process and reduce strain on their standard brick & mortar locations While online grocery remains underpenetrated, expect Walmart to begin to rapidly roll out grocery pickup across the country Implications for Retail Partners: The drive format opens up new opportunities around sampling and marketing Online ordering platform can support targeted messaging and recommendations