Amazon in Austin: How could online retailers impact local grocery stores?

September 27, 2017

When online-bookstore-turned-leading-retailer Amazon.com Inc. was born over twenty years ago, the thought that online stores could replace brick-and-mortar businesses was nearly unthinkable. In 2017, however, it’s entirely possible that Austin will start seeing more Amazon Fresh delivery trucks on the streets than grocery stores.

In August, Amazon purchased the Austin-grown grocery store Whole Foods Market Inc. for $13.7 billion. The merger has brought price cuts to Whole Foods and questions about how the online retailer could affect local food businesses.

According to Junfeng Jiao, an architecture professor at the University of Texas at Austin and a director of the Urban Information Lab, Amazon services such as Amazon Prime will change the way people buy groceries in cities like Austin. Jiao wrote an op-ed column for Texas Perspectives, an opinion service through UT News, earlier this month about how Amazon can use Whole Foods to further promote online shopping with the last major retail business it hasn’t yet fully expanded to: groceries.

Jiao said the shift towards online groceries through services such as Amazon Prime can also affect food deserts in Austin. Food deserts are neighborhoods and areas without access to fresh, healthy food. In 2015, Jiao wrote a paper for the Urban Information Lab exploring the food deserts in Austin and how transportation can affect access to healthy food; they found that among vulnerable populations, or populations in Austin at or near the poverty line or without a car, the availability of transportation can affect access to healthy food.

“One thing from the merger of Whole Foods is we will have a much better distribution network in the whole country, and especially in the Austin area,” he said. “Amazon Prime and Whole Foods will eventually be able to reach a lot of ground in Austin, and that will definitely move the desert, because instead of relying on your own transportation mode, you will receive the food like you receive a package.”

For example, of the more than 400,000 people in Austin living in areas where 40 percent of the population earned less than double the income needed to live, 82 percent could not walk to “good” sources of food, such as grocery stores, while only 52 percent could not walk to “bad” or less healthy food, such as fast food or convenience stores.

“In any given area in the city of Austin, the density of unhealthy food sources is almost double the density of good food sources,” he said. “That means residents of the city of Austin have much accessibility to faster food.”

UT radio-television-film senior Elle Pitcher said she buys her groceries, as well as most of her household products, from Amazon Prime because it saves her time.

“Using Amazon groceries is more practical for me because of my busy schedule,” Pitcher said. “I’m a film student, so I’m constantly on set and running around. As a full time student and employee, it takes too much time out of my day to drive to the nearest grocery store when I could be working and have them delivered on my doorstep.”

Jiao said in his op-ed that, because of its convenience and speed, Amazon could push out grocery stores in neighborhoods, including in the more vulnerable communities, similar to how Netflix and Redbox replaced physical video stores like Blockbuster.

City of Austin Office of Sustainability environmental program coordinator Amanda Rohlich said that Austin has some programs that work to increase availability of healthy food in low-income areas, such as farm stands and and a corner store program through GO! Austin/¡VAMOS! Austin.

However, Rohlich said that suddenly placing a grocery store into a neighborhood can have a destabilizing effect on the community.

“As the retailer moves in, property rates increase, tax rates increase, rent increases and ultimately people can’t afford to live there anymore,” she said. “These increased prices push even more people farther into the suburbs, which is a bigger problem because there are even less retailers available there.”

One way for brick-and-mortar grocery stores to successfully compete against online retailers is by fostering a sense of community, Jiao wrote in his op-ed.

“A good grocery store should be able to provide unique, inexpensive, high-quality food choices. And they must adapt to their environments,” he wrote. “In the end, uniqueness, technology adoption, downsizing and fostering a sense of community are the best strategies grocers can use to face the challenges ahead and thrive in the next decade.”

Read the complete project here by Jina Chung, Julianne Hodges, David Sternberg and Alana Hernandez. This project was produce for J321F: Reporting on City and County Government during the fall of 2017.
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