Amazon rivals turn to legal fine print to stem Whole Foods strategy
SAN FRANCISCO: Whole Foods Market met a new foe this summer during talks to lease a top retail space in a San Francisco mall: the Target next door. As City Center mall’s largest tenant, Target Corp had a say over changes to the property. According to people familiar with the lease discussions, Target balked at sharing the mall with Whole Foods because it feared competition from the grocery chain’s new owner, Amazon.com Inc.
Early attempts to persuade Target failed, and Whole Foods may now have to concede certain Amazon initiatives - such as lockers where customers can pick up goods ordered online - if it wants the location, the people said. Talks are ongoing.
A Reuters examination of real estate agreements and interviews with 20 retail landlords, lawyers and brokers show that the strings attached to operating in malls like City Center present an emerging and little-scrutinized challenge to Amazon’s quest to re-shape Whole Foods.
Across the United States, large retailers including Target, Bed Bath & Beyond Inc and Best Buy Co Inc have legal rights in many lease agreements that allow them to limit what Amazon can do with nearby Whole Foods stores, and where it can open new ones. Documents reviewed by Reuters show bans on Amazon lockers and delivery operations near a Target store in Illinois and also in Florida, where a new Whole Foods is set to open. Lockers for retrieving online orders are a way for Amazon to spur sales through the grocery chain.
In Manhattan and other locations, the leases of Whole Foods’ big box neighbors bar it from selling a range of goods that Amazon has in its massive online inventory, from electronics to toys and linens.
Even Whole Foods stores that do not share space with major rivals can face constraints imposed by local governments. A city council resolution in White Plains, New York, restricted the hours when Whole Foods can use a loading dock prior to the grocer locating in the mall.
Amazon declined to answer questions about how these restrictions across the country impact its plans. In a statement, Target said it is “focused on what’s best for the company and delivering on the reasons our guests love Target. Our more than 1,800 stores across the country are a strategic asset and a vital part of Target’s future.”
The company did not discuss details of the restrictions reported by Reuters, but said, “It’s inaccurate to characterize lease agreements as our corporate strategy.” Reuters could not determine the full extent of limits on Whole Foods stores because lease deals vary from mall to mall, and many are not public. While restricting how neighbors operate is a standard practice in retail, Amazon is new to feeling the heat. —Reuters