Amazon Reorganizes to Drive Growing Brick-and-Mortar Strategy

By 
Greg Lindenberg, Editor, CSP

Amazon

SEATTLE -- Amazon.com Inc. is consolidating its physical retail and fast-delivery operations—including its convenience-store unit—under one veteran executive as it integrates its Whole Foods Market with related businesses, people familiar with the matter told The Wall Street Journal.

The shift gives Steve Kessel, a veteran lieutenant of CEO Jeff Bezos, oversight of Whole Foods Market, Prime Now, AmazonFresh, Amazon Go and Amazon Books. The goal is to ease changes across those platforms as Amazon disrupts retailing and tries to reinvent the way consumers shop in stores, one of the people told the newspaper.

“There will be a lot of work together between Prime Now, AmazonFresh, Whole Foods, Whole Foods products on the Amazon site, Amazon Lockers at the Whole Foods stores. So there will be a lot of integration, a lot of touchpoints and a lot of working together as we go forward,” Brian Olsavsky, senior vice president and CFO of Amazon, said on the company’s Oct. 26 earnings call. “Over time, you'll see more cooperation and working together between AmazonFresh, Prime Now and Whole Foods as we can explore different ways to serve the customer.”

Kessel has overseen Amazon’s digital strategy, including books and music; he led the team that developed the Kindle e-reader and Fire tablet. He also headed up an effort to reimagine the in-store experience. The company put him in charge of Whole Foods—reporting to Jeff Wilke, CEO of worldwide consumer for Amazon—at the time of the $13.5 billion acquisition in August, and added Prime Now and AmazonFresh in recent weeks, the people said.

Here are some details on the businesses Kessel will lead …

Whole Foods

Whole Foods

In August, Amazon acquired specialty grocery chain Whole Foods Market for about $13.7 billion. It immediately lowered many prices. It also said it will install Amazon delivery lockers and introduce Prime membership benefits for in-store customers.

Analysts, investors and rivals are closely watching Amazon’s efforts in physical retailing and delivery, especially how it integrates Whole Foods. Potential changes, they say, could include combining supply chains of its grocery operations and adding fast Whole Foods deliveries.

Amazon Go

Amazon Go

Kessel also is the executive behind Amazon Go, the company’s cashierless convenience-store concept that launched in late 2016 for its own employees, but is still in beta testing and has not opened to the public.

The concept uses artificial intelligence to track customers as they select goods off the store’s shelves and automatically check out. The store, in Seattle, was supposed to open to the public earlier this year, but Amazon delayed its debut after difficulty implementing the technology with more than 20 customers.

AmazonFresh

AmazonFresh

Amazon has struggled in recent years to make its grocery business work, The Wall Street Journal said. Under Kessel, the online retailer has scaled back AmazonFresh, its grocery-delivery service, ending service in some areas.

Meanwhile, AmazonFresh Pickup, an app-based grocery-pickup service, opened for business in May at two Seattle locations.

Prime Now

Amazon Prime

Analysts have suggested Amazon is likely to incorporate Prime Now, its rapid-delivery service, which stocks a limited list of food and necessities that it can deliver in one or two hours, to offer orders from Whole Foods, said The Wall Street Journal. Currently, Whole Foods partners with grocery-delivery service Instacart.

“We’re going to learn with them how we can efficiently—and in a high-quality way—deliver groceries to our customers,” Wilke told the newspaper.

Amazon Books

Amazon Books

One of Kessel’s experiments was Amazon Books, a brick-and-mortar bookstore with a limited selection tailored by localized data. Prices aren’t marked; instead, customers scan barcodes with their phones, which allows Amazon to study how they browse, said The Wall Street Journal.