I went to Whole Foods' new small store and saw why it's a big part of Amazon's grocery growth plans

This space housed an Amazon Fresh location before it closed last year. The area around it includes several apartment and condominium complexes, a Metro stop, one of DC’s airports, and one of the major freeways leading into and out of Washington, DC.

Amazon selected this part of Arlington as the location for its HQ2 in 2018. Since then, the company has opened offices and other facilities in the area, such as this AWS Skills Center.

Whole Foods used to operate small stores under the name Whole Foods 365. This chain focused on the company’s store-brand products and prepared foods. The stores were aimed at younger, price-focused consumers.

The company shuttered the format in 2019.

While it’s also a small-format grocery store, Daily Shop avoids some of the mistakes that Whole Foods made with its 365 locations, said Phil Lempert, a food industry analyst and editor of the website Supermarket Guru.

The 365 stores carried mainly store-brand products to compete with other grocery chains on prices, Lempert said. “365 was just searching for a way to get the Kroger shopper to come to the store,” he said.

Lempert, who has visited other Daily Shop stores, said that the new stores carry items at multiple price points and are more focused on convenience than price. On my visit, for example, I spotted store-brand items as well as fancy French cheeses.

It helps that Amazon has cut prices on many items at all Whole Foods stores since it acquired the chain in 2017, he said.

“I think the Daily Shop store is back to food and really understanding the consumer,” he said.

A Whole Foods spokesperson said the format is meant to be quick and convenient, bringing stores closer to some customers and extending the company’s reach into surrounding neighborhoods.

“This format is designed to provide customers a quick, convenient shopping experience with easier access to the fresh, high-quality offerings they expect from Whole Foods Market,” the Whole Foods spokesperson said. “These stores bring Whole Foods Market closer to existing customers, while extending the company’s reach to others in surrounding neighborhoods.”

This sign, a reference to Whole Foods’ quality standards, appeared above the prepared food department.

I picked up a bag of these tortilla chips. The tequila lime flavoring was tasty, though they needed more of it.

I’ve enjoyed Whole Foods’ pizza bar at other locations, so I was happy to see it at Daily Shop.

This Friday-only discount on tiramisu and tres leches cake was for members of Amazon Prime.

While 365 products were throughout the store, I usually saw at least one name-brand equivalent, whether I was looking at breakfast cereal or toothpaste. That supports Lempert’s point that Daily Shop isn’t as focused on cheap groceries as its small-format predecessor was.

Bananas are a staple at virtually every grocery store, though if you wanted one or two, you might be better off getting them for free down the street at one of Amazon’s community banana stands.

Many Whole Foods and Amazon Fresh locations let Amazon customers make returns at their stores, and this Whole Foods Daily Shop location was no exception.

I headed for one of the open self-checkouts, though there was at least one regular checkout staffed by a person if I had wanted that.

The store wasn’t as busy as I worried it might be on opening day, so I didn’t have to wait in line to pay.

The checkout area was small, likely a reflection of this format’s focus on quick trips.

Whole Foods has a list of about 300 ingredients that it doesn’t allow in any of the food it sells, from foie gras to some food colorings. The shopping bag I got at checkout had dozens of them printed right on it.

Daily Shop seems to live up to Whole Foods’ promises. It’s not meant to replace a larger grocery store, but it’s a reasonable option if you need a few ingredients for a recipe or want something easy to heat up for dinner on the way home from work.

This Daily Shop store has competition on both fronts, though, with several restaurants on the block, and a Costco and a full-size Whole Foods about a 10-minute walk away.

That will be part of the challenge for these urban stores: Cities usually have lots of easy, quick food options, and Daily Shop will need to stand out in a crowd.

Do you have a story idea to share about Whole Foods? Contact this reporter at abitter@businessinsider.com.