Amazon is tinkering with its brick-and-mortar grocery strategy and may shift away from convenience stores as a retail format. Citing the omnichannel retailer’s Amazon Fresh grocery stores and Amazon Go c-stores, executives said they have “decided to exit certain stores with low growth potential.”
They did not provide details on which stores or how many will be shuttered.
“We recorded impairments of property and equipment and operating leases, primarily related to our Amazon Fresh and Amazon Go physical stores,” CFO Brian Olsavsky said during the company’s fourth-quarter earnings call on Feb. 2. “We're continuously refining our store formats to find the ones that will resonate with customers, will build our grocery brand and will allow us to scale meaningfully over time. As such, we periodically access our portfolio of stores and decided to exit certain stores with low growth potential. We'll also take an impairment on capitalized costs and associated values of our leased buildings. The impairment charge in quarter four was $720 million and is included in other operating expenses on our income statement.”
Seattle-based Amazon declined to comment to CSP concerning the closure or planned closure of any Amazon Go stores.
“We remain focused on driving cost efficiencies throughout the network and reducing our cost to serve our customers, while ensuring we maintain an outstanding customer experience,” Olsavsky said on the call. “We continue to believe grocery is a significant opportunity, and we're focused on serving customers through multiple channels, whether that's online delivery, pickup or in-store shopping.”
On the call, CEO Andrew Jassy said, “We think grocery is a really important and strategic area for us. It's a very large market segment, and there's a lot of frequency in how consumers shop for grocery. And we also believe that over time, grocery is going to be omnichannel.”
He said Whole Foods, which Amazon acquired in 2017, “is a very significant sized business that's continuing to grow. I really like the progress that business has made on profitability in the last year. And I like what I see in front of it, and I think that's a premium product, a significant business. It's a good business for us in the grocery space.”
He differentiated Whole Foods from Amazon Fresh, which the company launched in mid-2020. “We're doing a fair bit of experimentation today in [Amazon Fresh] stores to try to find a format that we think resonates with customers. It's differentiated in some meaningful fashion and where we like the economics. And we've decided over the last year or so that we're not going to expand the physical fresh doors until we have that equation with differentiation and economic value that we like, but we're optimistic that we're going to find that in 2023. We're working hard at it. We see some encouraging signs. And when we do find that equation, we will expand it more expansively.”
He concluded, “We have a very significant opportunity in the grocery segment. I think we're building a pretty broad grocery network across online and physical, and you're going to see us continue to work on it.”
Jassy did not say whether that opportunity included convenience. So plans for and the fate of Amazon Go c-stores still remain unknown.
Currently, in the United States, Amazon’s physical stores include 535 Whole Foods Markets, 44 Amazon Fresh grocery stores, 28 Amazon Go c-stores and two Amazon Style apparel, footwear and accessories stores. The company opened the first Amazon Go cashierless convenience store using its “just walk out” technology in January 2018.