Amazon halts Fresh supermarkets and cashier-less convenience stores expansion to look for right recipe for success
US – Amazon has paused the expansion of its Fresh supermarkets and cashier-less convenience stores until it finds a feasible track to success, Chief Executive Andy Jassy said in a rare appearance on the company’s quarterly results call.
According to CNBC, the online retailer long feared for disrupting the grocery sector also plans to close some Fresh supermarkets and Go convenience stores, as the e-retailer rethinks its grocery strategy and areas to cut costs after an extended period of outsized expansion.
Amazon currently operates several dozen Fresh grocery stores and 28 Amazon Go convenience stores, according to its website.
The company has also added delivery fees to some orders placed through Amazon Fresh online and a service fee for Prime members who want home delivery from Whole Foods.
Additionally, Amazon’s plans, announced this month, to eliminate 18,000 jobs, will include cuts across much of its grocery portfolio.
Jassy in his speech said the company needs a distinctive store format that’s doing well financially before embarking on a major expansion, a formula Amazon hopes to find this year.
Despite Whole Foods’ growth and remaining on top for premium, organic grocery, Amazon’s mass-appeal offering needed work to win significant market share in perishables, Jassy noted. The E-retail company a year ago said it would close its Amazon Books, 4-star, and Pop Up shops to focus on its grocery business.
“We’re continuously refining our store formats to find the ones that will resonate with customers, we will build our grocery brand, and will allow us to scale meaningfully over time,” Brian Olsavsky, Amazon’s finance chief, commented.
Olsavsky said that as part of a periodic assessment of its grocery portfolio, the company “decided to exit certain stores with low-growth potential” and took a $720 million impairment charge in the fourth quarter as a result.
Amazon has been determined to take a big share of the grocery segment since the launch of its Fresh grocery delivery service in 2007. In 2017, it made a historic takeover of acquired upscale grocer Whole Foods Market for $13.7 billion, attracting the attention of many analysts.
Michael Pachter, an analyst with Wedbush Securities, said Amazon has itself to blame, having drawn consumers to online shopping decades ago.
“Retail is a tough business,” he said. “They are flushing money down a toilet pursuing Amazon Fresh stores” and thinking “they can brand a new concept and capture share from retailers who have been successful for decades.
Nevertheless, Jassy remains bullish about Amazon’s grocery business and is pleased with the progress Whole Foods has been making in profitability in the last year.
Amazon’s mix of grocery offerings grew increasingly complex once it launched a line of Go cashier-less stores and a Fresh supermarket chain aimed at conventional shoppers.
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