Amazon halted its expansion to roll out Amazon Fresh grocery stores as the company undergoes evaluation on how to stand out from its competitors, especially since a lot of mainstream grocery stores expanded rapidly during the pandemic.
A sign is pictured above the entrance to Amazon's new Amazon Fresh store in Ealing, west London, on March 4, 2021. - Amazon on Thursday opened the first of its Amazon Fresh grocery stores in Europe, where customers will be able to buy goods without the need to queue at a checkout. Customers will scan a QR code on their way into the store, with cameras and technology identifying the items shoppers take from the shelves.NIKLAS HALLE'N/AFP via Getty Images
(Photo : NIKLAS HALLE'N/AFP via Getty Images) A sign is pictured above the entrance to Amazon's new Amazon Fresh store in Ealing, west London, on March 4, 2021. - Amazon on Thursday opened the first of its Amazon Fresh grocery stores in Europe, where customers will be able to buy goods without the need to queue at a checkout. Customers will scan a QR code on their way into the store, with cameras and technology identifying the items shoppers take from the shelves.
Halting Expansion
Chief Executive Officer Andy Jassy appeared during Amazon's quarterly results call and announced that they would pause the expansion of Fresh supermarkets and cashier-less convenience stores to evaluate and find the right strategy, based on a report from Reuters.
Before entering the major expansion, Amazon must find its own destruction format that will do well financially. This is an effort from the retail company to dominate the supermarket industry, which they have been aiming (and struggling) for since its closed acquisition of Whole Foods Market in 2017 for $13.7 billion.
"We're doing a fair bit of experimentation today with those stores to find the format that we think resonates with customers, is differentiated in some meaningful fashion, and where we like the economics," Jassy stated. He remains optimistic about finding a good strategy and dominating the industry this year as they planned.
While he acknowledged that the company's mass-appeal offering needs to be worked out, Jassy stated that Whole Foods is growing and remains on top for premium and organic grocery.
He highlighted the strengths in packaged food, paper products, pet, and personal care items. But through these offerings, Amazon has less market share in personable goods that shoppers often like.
The company has also been expanding its offerings as it grew increasingly complex since it launched a line of cashier-less stores and supermarket chains aimed at conventional shoppers. As of the moment, CNBC reported that Amazon currently operates several dozen Fresh Grocery Stores and 28 Amazon Go convenience stores.
Despite the acknowledgment of setbacks, the CEO stated that he was pleased by last year's progress of Whole Foods when it came to profitability. He added, "It's a significant business, and it's a good business for us."
Despite the retail company's large business from packaged food and other goods in online shopping, Amazon still has fearsome competition in the market, such as Kroger Co. and Walmart Inc. The company has yet to win a significant market share in perishables.
Analysts' Take
As per Bloomberg's report, UBS analysts stated that Amazon accounted for about 4% of the grocery market in the United States.
However, Wedbush Securities Analyst Michael Pachter said that Amazon has itself to blame as it drew consumers to online shopping decades ago with several expansions from the retail company for the last few years.
The analyst added that retail is a tough business, and a company cannot just brand a new concept and capture share from retailers who have been in the industry for decades.
