How Malls & Big Box Stores Are Using Real Estate Contracts To Stall Amazon’s Whole Foods Expansion

Image courtesy of Mike Mozart

While many Americans know the Whole Foods brand, there are only about 450 locations nationwide, a fraction of the number of stores held by national retailers like Walmart, Kroger, or Target. Amazon’s purchase of Whole Foods is expected to help grow the supermarket chain’s footprint — which would help Amazon’s food delivery business — but some competitors have realized they can use the fine print in their real estate contracts to undercut Amazon’s Whole Foods hopes.

When some major retailers sign commercial leases with malls and shopping centers, they include conditions in their contract that restrict that landlord’s ability to rent to businesses that compete with the retailer.

We’ve seen this before with chains like Starbucks and McDonald’s using their leases to block similar stores from competing in the same shopping buildings. Now, Reuters reports that Amazon’s competitors are looking through their real estate contracts to see if they can do anything to spoil the Whole Foods plan.

For instance, now that Whole Foods stores are selling and marketing Amazon electronics like Kindles and Echos, a Best Buy store could try to exercise its contractual right to restrict a neighboring Whole Foods from selling these devices.

Reuters reviewed leases for Target stores in two states that allow the discount chain to prevent Whole Foods from installing Amazon lockers. Another Target at a mall in California is fighting the planned opening of a Whole Foods store, seeking concessions like a ban on Amazon lockers for packages.

Restrictions on neighbors in malls are very common, but this is a new concept for Amazon, whose in-person retail experience has been limited to small bookstores and seasonal pop-up stores before acquiring Whole Foods.

A spokesperson for Target told Reuters that the chain is focused on its physical stores and on “what’s best for the company and delivering on the reasons our guests love Target.” That means defending its stores, since the chain’s survival and growth plans depend on drawing customers to those stores.

Amazon declined to comment to Reuters on how neighboring stores’ restrictions might affect its expansion plans that include Whole Foods.