H-E-B Takes on Amazon
Carlos Sanchez for Texas Monthly:
“This state-of-the-art space will be a hub for creativity and innovation as we continue to develop the ultimate digital experience for our customers,” Jag Bath, H-E-B’s chief digital officer and Favor CEO and president, said in a news release. “Bringing H-E-B and Favor closer together will allow us to promote collaboration between our two companies as we strengthen our commitment to building out H-E-B’s omnichannel services.”
The facility will be located on East 6th Street near downtown Austin. Favor has always been an Austin-based company, while H-E-B is based in San Antonio. Bath said that H-E-B’s expanded Austin footprint will bring several hundred new jobs to the Austin economy—mostly in the areas of product management, product design, and software engineering. The new tech facility is the latest move by the company that has sales of $25 billion and operates 400 stores in Texas and Mexico. The building is being designed by IA Interior Architects, the grocery giant said.
As I've written before, grocers are forced to grapple with Amazon's growing market share. Year-over-year, Amazon is gunning for grocery stores big and small. Until reading this piece, I had no idea H-E-B acquired Favor earlier this year. I'm happy to see a Texan grocery chain making moves like that in this arena. What's more surprising, Favor Delivery is based in Austin.
Placing a flagship H-E-B store on 6th Street in Austin is a totally safe move. I mean, the foot traffic alone will likely recoup the construction costs in just a couple of years time, perhaps even less.
Make no mistake, Austin (and the surrounding Metro areas) are becoming more and more walkable — Texans continue to leave their small hometowns and migrate to nearby cities for better opportunities. Besides, it's becoming increasingly clear, that people want a walkable city. Austin will continue to see population growth as long as tech companies continue to move to Texas. So, all-in-all this makes total sense to see H-E-B investing in more sensible store concepts than the more common mega-sized Wal-Mart clones.
Despite my misgivings for the mega-stores concepts H-E-B has opened in the past, many offers modern amenities such as Curbside Pick-up. Even a few remote store locations offer Curbside Pick-up. But Amazon, who now owns Whole Foods and is headquartered in Austin has had delivery available in all major cities for just over a year now.
I'm really curious to see how this showdown all shakes out. On one hand, you have a cult-classic Texan grocery chain (plus the Austin favorite, Favor) willing to fight the big dogs. But on the other hand, you have Whole Foods, who has deep roots with the Austin psyche. But, ultimately isn't Whole Foods just another arm of the ever-growing blob that is Amazon?
Personally I think H-E-B is a little late to the game. Winning over Austin will not be easy, but it is feasible. H-E-B's tenacity, willingness to spend money and innovate might just outpace Whole Foods/Amazon's strategy which has continually been, "cutting prices." Anyone in the grocery business will tell you outright, a race to zero is not sustainable in this space — even with Amazon's coffers and willingness to take huge losses.