Why Amazon Will Still 'Go Big' on Grocery

Citing lack of normalcy in the business environment, leader doubles down on physical store proposition

2/14/2023

Amazon Forecasts Modest 4th-Quarter Growth Amazon Fresh

Amazon CEO Andy Jassy told Financial Times this week that the company is pausing, not halting, its pursuit of physical grocery stores.

Nearly two weeks after hitting the pause button on the opening of new Amazon Fresh locations, Amazon has affirmed that it is going all in on physical grocery stores.

In an interview with the Financial Times, Amazon CEO Andy Jassy reported that the e-commerce company’s foray into on-the-ground food retailing has been slowed by a series of external circumstances. He maintained that Amazon will “go big” on its brick-and-mortar grocery business. “Remember, a lot of these opened right in the heart of the pandemic, so we haven’t had a lot of normalcy,” he noted.

During the lull in store openings, Amazon’s retail teams will work to enhance the Amazon Fresh operation, which has become known for its Just Walk Out technology and smart Dash Carts. “We’re experimenting with selection, checkout formats, assortment, price points. I’m encouraged we have several that I think are promising,” he told Financial Times, pointing out that the company is still in the early stages of the grocery business compared to other established chains and is known for its success in experimentation.

Jassy expressed similar sentiments during Amazon’s latest earnings call on Feb. 3. “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 at the time. “I think that we have a pretty significant-sized grocery business. I think people sometimes don't realize that and that we've been building for a long time. We're working hard at it.”

Amazon is also adjusting its Amazon Fresh digital business. In January, the retail behemoth announced a new pricing structure for grocery delivery, upping the threshold for free delivery from $35 to $135 and charging between $3.95 and $9.95 for other order sizes.

Even as the retailer tweaks the Amazon Fresh concept, the Amazon-owned Whole Foods Market banner continues to open locations. In 2023, new Whole Foods stores were unveiled in New York City and Bozeman, Mont.

Seattle-based Amazon is No. 2 on The PG 100, Progressive Grocer’s 2022 list of the top food and consumables retailers in North America.