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Is the Amazon footprint setting off a consolidation spree in retail space?

The grocery sector, which is currently the focal point of the fast-changing retail environment, is yet to recover from the dread induced by Amazon’s (AMZN) acquisition of Whole Foods last year, it seems. Leading grocery retailers are exploring new strategies to stay afloat amid mounting competition and fears of the e-commerce behemoth eating into their market share.

Adding to the concerns of its peers, post-acquisition, Amazon slashed the prices of the Whole Foods merchandise and announced plans to deliver meat, dairy products, and select alcohols to its premium customers free of cost.

Picture Courtesy: Mike Mozart

According to sources, the latest to pursue the consolidation route are grocery retailers Kroger (KR) and Target (TGT). With the idea behind the move being revival of the weakening supply chain, it is learned they started talks soon after Target bought on-demand delivery firm Shipt last year.

Meanwhile, some reports suggest that the companies dismissed the merger news as baseless. The shares of both Target and Kroger made strong gains in pre-market after business magazine Fast Company broke the news, only to pare most of the gains during early trading hours on Friday.

If the deal gets through, it would give a fillip to Target’s food business, while Kroger will benefit from expanded access to merchandise.

The latest to pursue the consolidation route are grocery retailers Kroger and Target

Others are expected to follow suit by clinching partnership with third parties to give a push to their digital delivery services, and also by following the footsteps of Walmart (WMT) which enhanced its delivery service through innovative ideas like curbside pick-up and in-home delivery.

Sensing the need to stay ahead in the race, Walmart also identified 100 more cities for extending its grocery delivery service by year-end.

It’s a fact that Target has desperately been looking for ways to revive the weakening supply chain for its fresh food segment. And, the company might have deemed that a potential solution to the problem is suitable partnerships.

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