Amazon testing grocery pickup concept to take on Wal-Mart

Amazon hasunveiled its long-rumoured grocery pickup concept store at two Seattle locations,  currently available only for employees on a pilot basis. According to commentators, the development is a direct challenge to Wal-Mart.

With AmazonFresh Pickup locations, Amazon Prime members would be able to order groceries online, make an appointment to pick them up and then drive through and have the grocery bags loaded into their trunk by an Amazon employee. The transaction does not need cash, as the entire process happens via the Amazon app or at home on the customer's computer.

The sites are located in the north Seattle neighborhood of Ballard and south of downtown in an area called SoDo, which stands for the "south of the domed" sports stadium that stood there at one time.

The AmazonFresh Pickup stores are different from the company's other recent brick-and-mortar concept store, the Amazon Go convenience store.

In the Amazon Go convenience store, cameras and sensors and other technology that communicated to the store which items a customer picked up. The customer's credit card is deducted as they leave, requiring no checkout lines.

The stores were set to open to the general public in March, but were only open to Amazon employees currently as Amazon found that the sensor technology reportedly became overstretched whenever there were over 20customers at the same time.

Though the test was only underway in two Seattle neighborhoods, it posed a direct challenge to Wal-Mart's grocery pickup service, according to commentators. The service had helped power Wal-Mart's recent sales momentum, including growth in its domestic grocery department last fiscal quarter, despite deflationary prices. It had also contributed to Wal-Mart's US division, boosting online sales by 29 per cent over the holiday quarter.

Wal-Mart last year expanded online grocery to over  600 locations across 100-plus markets and would roll out to roughly 500 more locations this year, a spokeswoman told CNBC.

"This model often makes more sense in suburban areas, as the delivery model is often too expensive to execute given the lower population density," Citi analyst Alvin Concepcion wrote in a recent research note, CNBC reported. "It can also be convenient for customers to schedule their grocery pickup window when they're getting off of work or some other routine time."