In a shocking new report coming from Bloomberg, Amazon is looking to ready a massive push into brick and mortar that would rival the largest c-store chains. A rumored 3,000 store push would put Amazon into the top operators of convenience stores, competing with the likes of 7-11, and it can do it quite easily.

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Leveraging the same sensor technology in the flagship AmazonGo store that opened in downtown Seattle, Amazon can leverage this tech to create a might higher margin brick and mortar business than that of its competitors, simply for the fact that it doesn’t need as many employees.

Amazon focused on food

The stores look to be a mix between a “Subway and a 7-Eleven” with fresh, prepared foods and a limited selection of groceries. This would not only threaten your large incumbents like gas station convenience stores, but also could have a pretty big impact on mom-and-pop restaurants who specialize in quick lunches, and fast casual places like Panera Bread or a Chipotle ($CMG).

While it may not be enough to knock off heavyweights like McDonalds ($MCD), Wendy’s ($WEN), Sonic ($SONC), WalMart ($WMT), or Kroger ($KR), you could see some downward pricing pressure. Remember, Amazon has more than 100 million Prime members, who can be marketed to within minutes. That can drive significant revenue and exposure right out of the gate.

Location could be a challenge for Amazon

With the US having ~155,000 convenience stores, approximately 122,000 of those stores are inside of a gas station (or attached to it somehow), and the industry currently generates $233 billion in sales (based on 2016 numbers), with the leading seller being tobacco.

Breaking out category sales of c-stores, the top ten are as follows:

  • Cigarettes
  • Packaged beverages (non-alcoholic)
  • Beer / Malt Beverages
  • Other tobacco products (think dip, chew, eCigs, vapes, etc)
  • Edible grocery
  • General merchandise
  • All other merchandise
  • Candy
  • Salty snacks
  • Non-edible grocery (think paper plates, cups, etc.)

The biggest challenge that Amazon could face would be real estate, as the gas station and c-store industry is a very well established one, holding ownership or long term leases for a majority of some of the prime corner real estate.

The C-store players Amazon could disrupt

While your major energy players have c-stores attached to their gas stations, you do have a few major energy players like BP Plc ($BP), Chevron ($CVX), Marathon Petroleum ($MPC), and Valero Energy ($VLO) that could see some market shifts if their operators start to lose money on snack purchases.

Individual stocks to study and look at over this announcement are Casey’s General Store ($CASY), which holds approximately 1,800 locations in the midwest, and Murphy USA ($MUSA), holding another 1,200 locations in the midwest and south. Another major player is Sheetz in the combined gas / c-store category, but unfortunately they are a privately held company.

Take into consideration what this could mean long term, and execute trades based on news that will come out about this interesting Amazon plan.

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