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Amazon is tinkering with grocery business. Some are unsure it's working

Lauren Rosenblatt, The Seattle Times on

Published in Business News

When Amazon introduced its cashierless checkout system — aptly called Just Walk Out — the tech was seen as the latest prong in Amazon’s mission to transform brick-and-mortar stores and become a dominant competitor in the grocery industry.

Roughly seven years later, Amazon is taking that technology out of its grocery stores, and the revolution it had hoped to bring has yet to materialize.

Amazon says it is still committed to its grocery efforts — which these days include sales from Amazon.com, Amazon Fresh grocery stores, Amazon Go convenience stores and Whole Foods Market. But analysts are divided on how to interpret recent changes in Amazon’s grocery strategy.

On top of removing the Just Walk Out technology from Fresh grocery stores, Amazon closed some stores, paused expansion for new locations and reformatted others. It laid off some workers in its grocery division, shelved its idea for drive-up pickup sites and experimented with a new subscription model for online shoppers.

Is Amazon’s grocery business approaching its expiration date?

“In the world of nonperishable, nonedibles, Amazon is very dominant,” said Sucharita Kodali, an analyst from Forrester who has followed Amazon’s grocery efforts since they started. “In fresh foods, Amazon is not a significant player.”

 

“If I were Kroger, I would not spend a lot of time focusing on Amazon as a competitive threat.”

At the company’s annual shareholders meeting last month, CEO Andy Jassy listed grocery as one of the many businesses Amazon is passionate about growing. Chief Financial Officer Brian Olsavsky told reporters earlier this year the company was “pleased” with its growth in physical stores.

“You’ll see us continue to iterate in grocery because we believe when we find the right mix of offerings for customers, we can meaningfully improve their shopping experience,” Tony Hoggett, Amazon senior vice president of worldwide grocery stores, said in a statement to The Seattle Times.

But the changes over the past several months have left many analysts and academics skeptical of how Amazon is going to succeed in a competitive, low-margin business — and some questioning how long the company should keep trying.

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