Amazon chief promises to “go big” on physical stores

Andy Jassy claims that e-commerce giant Amazon will double down grocery sales despite recent failures.

Andy Jassy, Amazon’s chief executive, has pledged to double down on its struggling grocery store business despite recent announcements that it was putting off its growth plans.

Jassy stated that the e-commerce company was ready “go big” for brick-and-mortar shops. He blamed a lack of “normalcy” during pandemics for a series a stumbles.

Five years after purchasing Whole Foods for $13.7bn , the largest acquisition ever made by Amazon, the company has not been able to disrupt the US grocery sector that is worth $1.6tn.

Amazon announced this month that it had suffered a $720mn impairment during the third quarter 2022. This was due to its grocery expansion plans.

Jassy stated, “Remember that many of those opened right at the heart of the pandemic.” So we have not had much normalcy. We are experimenting with different checkout formats, selections, assortments, and price points. It’s encouraging to see that there are many options available, which I believe is a good sign.

According to Amazon’s quarterly earnings reports, revenue for its physical store unit has only grown 10% since the Whole Foods deal and is just 3.4% of Amazon’s overall business.

Jassy stated that “we’re still in the early stages.” “We are hopeful that by 2023 we will have a big format on the physical side.

“We are known for doing lots of experiments and then doing it quickly. Then, we double down when we find something we like. This is what we plan to do.

Amazon has always regarded building a strong grocery division as one of its top priorities. Jeff Bezos, the founder of Amazon, announced that he would retire as chief executive in February 2021. However, he stated clearly that he would continue to serve as executive chair for “important Amazon initiatives”, including grocery.

Analysts said that the Whole Foods acquisition did not provide the foundation for an Amazon-wide strategy. The inconsistent formats of stores made it difficult to use them as local delivery hubs.

Amazon instead created its own stores in a range of sizes, including Amazon Go-sized stores that are cashier-less and powered by an extensive array of cameras that track customers, to Amazon Fresh, which is a more traditional offering but has a few tech-enhanced features like “smart shopping carts”.

However, plans to open 200 Fresh stores have merely led to several dozen. Some US locations are due to open in the future.

Amazon Fresh, an Amazon Fresh-only delivery service, has not seen much traction. Amazon now charges a $9.95 US delivery fee for orders below $50. Jassy stated that he was optimistic about Amazon’s online grocery business but admitted that people want to feel and touch food before they buy.

Amazon has eliminated all other physical store experimentations, including “4-Star”, which sells an assortment of items rated at least four stars by reviews.

Neil Saunders, a retail analyst, stated that “they don’t really know physical retail very well.” He suggested that Amazon’s technology was not enough to change the American consumer’s habit of buying at established retailers.

They don’t have ‘just walk out’ technology. Instead, they have smart carts. It’s really cool. How many customers will say “Hey, I’m going shopping somewhere because they have a smart cart”? “No one.”