Amazon’s chief executive says the company is committed to reviving its struggling physical grocery business.
“We’re just still in the early stages,” Andy Jassy told the Financial Times (FT) in an interview published Monday (Feb. 13).
“We’re hopeful that in 2023, we have a format that we want to go big on, on the physical side. We have a history of doing a lot of experimentation and doing it quickly. And then, when we find something that we like, doubling down on it, which is what we intend to do.”
The report notes that Amazon — which acquired Whole Foods for $13.7 billion in 2017 — has not yet broken into the grocery sector the way rivals had once feared.
The company took a $720 million impairment charge in the last quarter of 2022 as Amazon Fresh grocery stores were shuttered, while new openings were put on hold. In the FT interview, Jassy blamed the pandemic for Amazon’s grocery struggles.
“Remember, a lot of these opened right in the heart of the pandemic,” he said. “So we haven’t had a lot of normalcy. We’re experimenting with selection, checkout formats, assortment, price points. I’m encouraged we have several that I think are promising.”
Jassy’s latest comments follow his statement earlier this month after the company’s most recent earnings report that Amazon was continuing to perfect its “mass physical store” concept via Amazon Fresh locations.
However, he added that the company was committed to conducting further experimentation to find a format that it thinks connects with customers and is meaningfully differentiated — and where it also likes the economics.
“We’ve decided over the last year or so that we’re not going to expand the physical Fresh stores until we have that equation, with differentiation and economic value that we like,” Jassy said, “but we’re optimistic that we’re going to find that in 2023.”
Jassy is approaching the second anniversary of his appointment as Amazon’s CEO, and — as noted here Monday — is facing two major challenges: turning his company around, and finding a way to escape the shadow of his predecessor, Amazon founder Jeff Bezos.
The FT report includes remarks from retail analyst Neil Saunders, who argued Amazon’s tech innovations hadn’t convinced consumers to abandon their preferred grocery stores.
“They’ve got ‘just walk out’ technology, they’ve got smart carts,” Saunders said. “Great, really interesting. But how many customers say, ‘Hey, I’m going to shop somewhere because they’ve got a smart cart’? No one.”
Meanwhile, research by PYMNTS finds that just 7% of grocery shoppers make purchases online all the time, while a much larger group — 54% — say they shop in physical stores all the time.
The study also found that consumers disproportionately continue to buy fresh produce in physical stores. While only 44% of consumers buy more than half of their grocery store items in stores on average, 53% purchase the bulk of their fresh fruits and vegetables in physical stores.
In an interview with PYMNTS, Alex Ruhter, CEO and co-founder of curbside-only grocery store JackBe, argued that consumers’ particular preferences for their fresh fruits and vegetables tend to hamstring the adoption of digital channels.
“It’s really hard to nail the quality of freshness and ripeness that customers would choose if they were shopping themselves,” Ruhter said.
“So, we’ve really been intentional about training our staff to know how to pick fresh produce, but also asking our customers if they’d like to see their produce even before it gets in their car, and then we can confirm that it’s exactly what they want.”
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