Amazon's Struggles in the Transition from Online to Physical Grocery Stores

Daniel Kaye was devastated when he learned in 2021 that his local Barnes & Noble was being evicted from a nearby shopping plaza. "Whoever owned the shopping center had a plan, and it didn't involve them," said Kaye, a children's book author.

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That plan turned out to be an Amazon Fresh. The advanced grocery store with affordable prices was intended to transform the Willow Grove shopping plaza in suburban Philadelphia into a trendy hub for tech-savvy commuters, as stated on its website.

However, two years later, the location remains empty. Willow Grove is now suing for breach of contract — one of four lawsuits targeting the struggling Amazon Fresh experiment.

Despite its cashier-less checkout and automated shopping carts, Amazon Fresh has proven to be more exasperating than enjoyable for some customers and current/former employees claim. In February, as the company faced economic challenges and laid off workers, Amazon halted its grocery expansion, putting projects in over a dozen locations on hold and leaving potential landlords and locals in a bind.

Now, the company is implementing significant changes — reducing shifts, eliminating hundreds of jobs, and even introducing traditional checkout options alongside its signature high-tech systems. While Amazon CEO Andy Jassy has acknowledged that grocery remains "a major growth opportunity," the situation could be existential: According to an anonymous former employee, staff were informed that this year could be "make or break" for Amazon Fresh.

This wouldn't be the first time the tech giant stumbled during the transition from the internet — where it excels at selling products — to the physical realm. Amazon entered brick-and-mortar retail with Amazon Books in 2015. However, all Amazon Books stores have since closed, along with its 4-Star gift and gadget stores and on-demand healthcare service Amazon Care. Its Amazon Go convenience stores have also significantly scaled back, and its Amazon Style clothing stores have not expanded since their launch last year.

The setback with Amazon Fresh has now led to four lease-related lawsuits seeking damages ranging from $50,000 to $14 million. The outcomes of these complaints are yet to be determined in court. However, Amazon's legal troubles highlight how the rapid decision-making and quick reversals that served the e-commerce giant well on the web may not translate to the physical world.

According to a Bloomberg report on Wednesday, Amazon is revamping its grocery business, which includes upgrading some warehouses and offering delivery to non-Prime customers. Amazon Fresh is also undergoing a makeover, with a reduced emphasis on high-tech features and the introduction of traditional grocery store elements such as self-checkout, expanded product selection, and coffee and doughnuts near the store entrance.

Amazon stated that it does not comment on ongoing litigation. Regarding the pause in Fresh store expansion, spokesperson Jessica Martin explained in an email statement: "Like any retailer, we periodically evaluate our store portfolio and make optimization decisions that may involve closing existing locations or choosing not to proceed with planned locations."

The company already has "a large online grocery business and millions of products available for fast delivery, and the next step is to continue building out our physical presence, and we're well on our way — our physical store sales are up year-over-year," Martin added. Physical store sales in the first quarter of 2023 increased by 7 percent compared to the previous year, reaching $4.9 billion.

"We understand that establishing a successful physical grocery business beyond Whole Foods Market, which is performing exceptionally well, will require significant investment, innovation, and perseverance," she continued. "We remain committed because we believe that when we find the right combination of offerings for customers, we will be able to make their lives even easier."

طلحة عبد الكريم
By : طلحة عبد الكريم
مدير و محرر مدونة الموقع التقني.