Thursday 22 June 2017

Grocery Getters Begone: How Amazon Buying Whole Foods Could Pare Demand for Cars

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Whole Foods

The $13.4 billion purchase of Whole Foods by Amazon almost certainly compounds the anxiety felt by companies that rely on traditional brick-and-mortar retail models. Once the reality of this arrangement soaks in, it might also bring some heartburn to car dealers and the auto industry, too, alongside the acceleration of a paradigm shift in how (and how often) Americans use their own vehicles.

With more than 60 percent of U.S. households enrolled in Amazon’s Prime and 444 U.S. Whole Foods stores that could be used as logistical hubs, the home-delivery service that’s expected to follow could be a disruption on the same level as today’s rapidly developing car-sharing and ride-hailing options. If people no longer need to worry about where to put that weekly cartful of groceries to drag it home, there’s not nearly as much incentive to invest in a second (or third) car.

According to a 2015 USDA survey, about nine out of 10 U.S. households use their vehicles to go grocery shopping, driving an average one-way distance of four miles to get to a preferred store.

That could change quickly, with implications for emissions, traffic congestion, and, indeed, car sales. A fact sheet from the U.S. EPA, released in January 2016 was unusually prescient for a federal agency. It examined the environmental consequences of buying groceries online and having them delivered instead of driving to a store. It noted that more than 17 million metric tons of carbon dioxide pollution are associated with household trips to the grocery store. That’s equivalent to the annual carbon emissions from more than 3 million cars.

The EPA noted that while grocery delivery would reduce greenhouse-gas emissions, emissions of other pollutants such as nitrogen oxide (NOx) could increase. That’s where tougher 2018 to 2027 commercial-truck standards, jointly adopted by the EPA and the National Highway Traffic Safety Administration (NHTSA) last year and widely endorsed by truckmakers, would prove their worth.

Whole foods first store

Although the Whole Foods move is surely a pinch point for the grocery-store model, a widespread transition to home-delivered groceries is near. It has been 10 years since Amazon first started delivering some grocery items through its Amazon Fresh channel; and just last year, the company revealed an Amazon Go concept—a physical store that does away with traditional checkout lines and cashiers, opting instead for sensors and cameras that tally what you pick up and carry out. Amazon has also demonstrated drive-through grocery-pickup concepts in Seattle. Seeing the juggernaut coming at them, grocers nationwide are creating their own online ordering and pickup or delivery services.

Meanwhile, vehicle ownership rates are already on a downward trajectory, whether measured as cars per person, per driver, or per household. This is happening as households have more issues with vehicle affordability. Credit-reporting company Experian noted earlier this year that average loan amounts for new and used vehicles reached record levels, while loan delinquency rates were on the upswing through 2016. Doing away with that debt—and making time-consuming trips to the grocery store obsolete—could help take some of that anxiety away and let us enjoy the cars we love on trips that don’t involve runaway shopping carts and parking-lot dings, while sharing the road with fewer drivers.

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