Amazon finds in-store grocery a harder sell
Amazon is consolidating its grocery business after a rough couple of years for its physical retail stores. The company told Marketplace in a statement it’s eliminating “a very small number” of jobs across teams working on Amazon Go convenience stores and Amazon Fresh grocery stores.
The company has shuttered about half of its tech-centric convenience stores in the last couple of years and slowed expansion plans for grocery stores.
Of course, Amazon still has more than 500 Whole Foods locations, the upscale health food chain it bought in 2017. And earlier this year, Whole Foods’ CEO was put in charge of Amazon’s broader grocery business.
Amazon, which is a Marketplace underwriter, launched its Go and Fresh store concepts in 2018 and 2020. Their focus was on high-tech: Customers could walk in, pull products off the shelf and walk out — their purchase tracked by a system of sensors or a smart cart.
“It didn’t go well,” said Phil Lempert at SupermarketGuru. The novelty wasn’t enough.
“When people go shopping for food, guess what they want? They want food,” Lempert said. “They want to talk to, you know, Betty the baker and Bob the butcher and, you know, Sal the seafood monger.”
Amazon has mastered the technical side of retail by optimizing supply chains and logistics for its online operations, said Neil Saunders, a consultant at GlobalData.
“You certainly need those skills, but you need softer skills as well. It’s about the customer service. It’s about the experience, about the ambience, it’s about how customers feel,” he said.
Last year, Amazon began revamping its grocery stores — adding everything from better lighting and more colorful signage to a bigger selection of products and a heavier emphasis on fresh, prepared foods.
The problem now, said CFRA analyst Arun Sundaram, there just aren’t enough of them.
“I think to really be successful in grocery, you need to have a strong physical footprint as well as a strong online presence,” he said.
He pointed to Walmart, which has almost 5,000 locations. There are 15 Amazon Go convenience stores and 60 Amazon Fresh grocery stores nationwide.
Amazon has been tentative about plans to open new stores. “My guess is they’re kind of keeping this warm as to when there might be a day where it makes more sense to go after it,” said Dylan Carden, an analyst at William Blair.
He said low-margin grocery stores might not be on the front burner for big capital investment right now. “Grocery is not the sexiest of industries, right?”
Especially since artificial intelligence started turning heads in tech.
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