Amazon‘s physical retail experiments have disappointed up to now, but this year the company wants to go big with a new supermarket format. CEO Andy Jassy admits that most people want to see food before buying.
Expectations not met
Since its acquisition of American supermarket chain Whole Foods in 2017, expectations were high: Amazon would use its dominant position in e-commerce to reinvent the physical retail market as well. Food would become the lever for the retail giant to truly become the “everything store” – or so most analysts thought.
More than five years later, the disappointment could hardly be greater: Amazon’s sales from physical shops have grown by only 10 % since then and now represent 3.4 % of its total business. Non-food store concepts such as Amazon 4 Star and Amazon Books were soon abandoned, and expansion of supermarket formats developed in-house also fell far short of expectations.
The technology of the cashierless Amazon Go convenience stores works (almost) flawlessly, but it is very expensive and the retailer is struggling to sell the technology to other retailers. An exponential expansion of the convenience store chain failed to materialise. Even of the somewhat larger Amazon Fresh supermarkets, equipped with smart shopping trolleys, the retail giant opened only a few dozen instead of the promised 200.
Those stores also serve as pick-up points for online groceries, but the Amazon Fresh delivery service has not had a real breakthrough either. Jassy told the Financial Times he is optimistic about online groceries, but also acknowledges that people want to touch and feel food before buying. He vehemently denies that Amazon is giving up on supermarkets: on the contrary, the retailer plans to launch a new offensive before the end of this year. In anticipation, Amazon has recently closed some stores and delayed the opening of new locations.
“We’re just still in the early stages,” he said. “We’re doing a lot of experiments, and we’re encouraged by several of them. We’re experimenting with selection, checkout formats, assortment, price points. We’re hopeful that in 2023, we will have a format that we want to go big on.”