Amazon exploring best format for physical grocery

CEO Andy Jassy said that while Whole Foods Market is promising, Amazon is still working to find the best format to scale.
Amazon Advances Food Agenda and Retail Ranking
  • Despite recent shifts in its brick-and-mortar strategy, Amazon is committed to physical grocery stores.
  • In a letter to shareholders, CEO Andy Jassy said the e-commerce retailer was still looking for the right format to scale.
  • Amazon earlier this year slowed its expansion of brick-and-mortar Amazon Fresh grocery stores. 

Amazon remains committed to the grocery business and is searching for the best physical format to scale its efforts in the category. 

Amazon CEO Andy Jassy in an April 13 letter to shareholders said the retailer was still committed to expanding its efforts in grocery despite recent strategy shifts for the e-commerce giant. 

“Grocery is an $800 billion market segment in the U.S. alone, with the average household shopping three to four times per week,” Jassy said in the letter. “Amazon has built a somewhat unusual, but significant grocery business over nearly 20 years,” he said, adding that Amazon began its efforts in grocery by adding supermarket products that didn’t require temperature control, like boxed foods and paper towels. 

Amazon in 2017 purchased the Whole Foods Market grocery chain, and as of last year , Amazon had opened more than 60 additional Whole Foods Market locations since acquiring the grocery chain. Presently more than 500 Whole Foods Market stores operate nationwide. Amazon has evolved the in-store experience at the chain, recently debuting its Amazon One palm readers at Whole Foods Market locations in Denver and expanding the presence of its smart Dash Carts and Just Walk Out tech. Jassy said broader changes at Whole Foods Market since the Amazon acquisition have been to drive better profitability.

Jassy in the letter called Whole Foods Market, which is  focused on natural, healthy and organic foods and specialty items, “large and growing” and on an “encouraging path.” Still, Jassy said Amazon needed to search for another format to more broadly scale its ambitions in the mass grocery category. 

Jassy noted Amazon’s efforts in brick-and-mortar grocery during the past several years had been centered around its Amazon Fresh concept, which focuses on reducing friction for customers by offering advanced technology like its Just Walk Out. But Amazon in February said it would close underperforming Fresh stores, as well as some Amazon Go convenience store locations. Amazon currently operates 44 Fresh stores, according to the retailer.

“While we’re pleased with the size and growth of our grocery business, we aspire to serve more of our customers’ grocery needs than we do today,” Jassy said. “To do so, we need a broader physical store footprint given that most of the grocery shopping still happens in physical venues.” 

Jassy added: “Grocery is a big growth opportunity for Amazon.”