Dive Brief:

• Sprouts’ CEO Amin Maredia said the retailer’s online ordering and delivery partnership with Amazon Prime Now could expand to as much as half of the company’s stores, according to FoodNavigator-USA.com. 
• This year, Sprouts plans to increase the number of stores offering online ordering and delivery through Amazon to increase from ten to twenty. Sprouts currently operates 279 stores in 15 states.
• Sprouts reported $1.2 billion in net sales for the third quarter last week, a 15% increase over the same period last year. The company also reported a 1.4% increase in comp-store sales, and noted it had increased its store footprint by 13 locations.

Dive Insight:

Although most grocers that have decided to let a third party handle their e-commerce capabilities have chosen Instacart or Shipt, Sprouts has seen promising results from its partnership with Amazon. The Seattle company, who despite its size and clout mostly works with small chains and independent stores, nevertheless offers the logistical expertise and ordering platform that many retailers couldn’t operate themselves.

Amazon’s own ambitions in grocery retail have been a concern for some retailers. With its AmazonFresh service and thousands of grocery products offered through its site, a partnership might amount to aiding a competitor. And with Amazon growing and fine-tuning its services, having access to grocery retail systems and customers could be the equivalent of letting the fox in the hen house.

Those concerns have increased now that Amazon is set to take over Whole Foods. Sprouts, it seems, should be particularly concerned since it competes with Whole Foods and will increasingly do so as it grows its footprint along the east coast. For Amazon, helping Sprouts could cut into Whole Foods sales in markets where the two operate.

One could certainly imagine the partnership dissolving sometime in the coming year. Indeed, both sides seemed to acknowledge this possibility by inserting a clause in their contract that stipulates one side give the other ample notice before this occurs.

Then again, Sprouts CEO Amin Maredia’s emphatic support of the partnership indicates these concerns may be overblown. Amazon’s e-commerce platform is a for-hire service, after all, and won’t determine Sprouts’ broader market strategy. For years, retailers like Safeway have sold their private label brands to other retailers. Similarly, Sprouts and Amazon may see more upside than downside to their continuing their transaction.