Amazon intends to adjust its approach and model to keep expanding in grocery.
Amazon is not giving up on its Fresh grocery format. Even after pausing Amazon Fresh store buildouts, the company is sticking with physical grocery, adjusting its approach and model.
"On grocery, we're pleased with the progress we're making there," said Andy Jassy, Amazon’s CEO, during the company's recent fourth-quarter earnings call.
“If you want to serve as many grocery needs as we do, you have to have a mass physical presence,” he said “And that's what we've been trying to do with Fresh over several years."
Following a refresh of two Amazon Fresh stores in the Chicago area, a company survey showed that 90% of those shoppers reported that they were very satisfied with the changes. That feedback, along with other learnings, spurred similar updates to three other Amazon stores in the Los Angeles market, in Pasadena, Irvine and Woodland Hills. The stores will be stocked with more than 2,000 new national and private label brands and include an on-site Krispy Kreme Doughnut shop.
“We’ve been testing a V2 of our Fresh format in a few locations near Chicago [and] in a few locations in Southern California,” said Jassy. “It's very early. It's just a few months in, but the results thus far are very promising, and on almost every dimension.”
While the results seem promising, Amazon said that the company still needs to test for “a little bit longer.” If results continue to resonate, then, according to Jassy, the issue becomes what the best way to expand is.
Amazon has been making headlines for its so-called “zombie” storefronts – leased Amazon Fresh locations that remain construction sites or are vacant. Last month, storefront locations in Westport and Brookfield, Conn., that were once expected to become Amazon Fresh stores were actually acquired by Big Y Foods Inc.
Last year also marked the end of the company’s Amazon Fresh Pickup experiment. Amazon closed its two facilities in Seattle that served as a dedicated drive-up grocery pickup service for Amazon Prime members.
In addition to noting that Amazon was better cementing its presence in physical grocery, Jassy also observed during the Q4 earnings call that the company is working to better leverage logistics capabilities between its grocery business segments, which include Whole Foods Market.
Meanwhile, Amazon is celebrating impressive results for Q4. The company reported a record-breaking holiday shopping season that helped close out a robust 2023. North America segment net sales rose 13% year over year to $105.5 billion.
Seattle-based Amazon is No. 2 on The PG 100, Progressive Grocer’s 2023 list of the top food and consumables retailers in North America. PG also named the company one of its Retailers of the Century.