Amazon CEO: We’re going big on physical stores

Amazon chief executive Andy Jassy has put aside rumours that Amazon’s bricks-and-mortar retail arm has been put on hold, claiming the company is ready to double down on the division.

Jassy told the Financial Times that a lack of “normalcy” during the pandemic caused a number of roadblocks for the US retail giant.

Despite acquiring Whole Foods for $13.7 billion five years ago, Amazon has yet to make significant gains in the $1.6 trillion US grocery sector.

The firm was forced to pull the reins back on its grocery expansion, leading to a $720 million impairment in the last quarter of 2022.

“Remember, a lot of these opened right in the heart of the pandemic,” Jassy told the Financial Times.

“So we haven’t had a lot of normalcy. We’re experimenting with selection, checkout formats, assortment, price points. I’m encouraged we have several that I think are promising.”

Revenue for its physical retail division, as reported in its quarterly earnings reports, has only grown by 10% since the Whole Foods acquisition.

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It represents just 3.4% of Amazon’s business.

“We’re just still in the early stages,” Jassy added. “We’re hopeful that in 2023, we have a format that we want to go big on, on the physical side.

“We have a history of doing a lot of experimentation and doing it quickly. And then, when we find something that we like, doubling down on it, which is what we intend to do.”

Building a large grocery business has long been touted as one of Amazon’s most important priorities moving forwards.

Analysts however have criticised the acquisition of Whole Foods after failing to provide solid foundations for an expansion.

Mainly due to the inconsistent store formats making it difficult to use the locations as local delivery hubs.

Instead of relying on the Whole Foods subsidiary, Amazon moved to create its own grocery stores, fitted with checkout-free Just Walk Out technology.

However, plans to open more than 200 Fresh stores have in fact just led to several dozen being closed, both in the US and the UK.

Amazon Fresh delivery-only has also failed to pick up any negligible business for Amazon, with the company having to raise the delivery fee to shoppers in the US for orders under $50.

Jassy said he was “optimistic” about its online grocery business, but acknowledged that “people want to actually touch and feel” food before buying.



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