![]() Turner said these food bars have been a very popular draw in Whole Foods and could help drive delivery volume. That enhances the proposition of the mass grocery format off of a of a centralized kitchen,” he added. “Specifically, if Amazon wanted to fuel their mass-market groceries with Whole Foods, they could have a central kitchen that’s delivering a chunk of the prepared food to a grocery store that doesn’t have a kitchen. ![]() ![]() Gildenberg said the move suggests Amazon wants to distribute fresh food in locations without kitchens. Recent reports suggest that Amazon is reportedly planning to build off-site kitchens to better serve Whole Foods’ in-store customers who enjoy its food bars for a quick lunch or dinner option. And Amazon isn’t done investing in Whole Foods. The most promising aspect of Whole Foods, for Gildenberg, is that it serves as a launch pad for third-party brands in the natural organic market space. It’s a good thing to have in your portfolio,” said Gildenberg. Where Whole Foods succeedsīoth experts agreed that, at a high level, Whole Foods does serve a need as a grocery store for wealthier shoppers. But that was also slightly below the $3.1 billion in profits clocked in during the third quarter of 2021. In the third quarter, the Seattle tech giant swung to a profit of $2.8 billion compared to a loss of $2 billion in the previous quarter. That’s just not what Amazon is good at - Amazon is good at applying technology and systems to things run more efficiently,” Gildenberg said.Īmazon’s shifting moves at grocery comes after a year in which the company has struggled to consistently maintain profitability. “Amazon is not a business necessarily that has a core competency in employing skilled people in thousands of locations to do site specific work. In Gildenberg’s eyes, a mass grocery format might economically be better suited for automation compared to a premium chain like Whole Foods. “Amazon is looking for a model where they can have a grocery store that they can use to service the shopper more frequently, as well as more cheaply than they’re able to do in their e-commerce purchases,” he added. One of the most obvious is it just drives what’s called frequency of order,” said Turner. “Amazon really has to win grocery and there’s a number of reasons why they feel like they need to own it strategically. Sean Turner, chief technology officer at grocery tech startup Swiftly, said Jassy’s remarks are the latest sign that Amazon desperately wants to succeed in the grocery market. Amazon’s share of grocery sales in estimated to drop from 24.2% in 2017 to 22% in 2024, according to data from eMarketer. The company also announced it would close eight Amazon Go convenience stores to drive better profitability. Its food delivery service Amazon Fresh recently raised minimum delivery fee to combat slower growth. In addition to Jassy’s letter to shareholders, there are other changes Amazon has made recently that suggest the company is still trying to figure out the right playbook for grocery. My guess is that they are going to need a format that just looks a little bit more like a conventional grocery store.” Finding the right grocery profit model “Whether that’s Amazon Fresh or whether it’s something different than that I think is an open question. “I think what they were alluding to is they’re going to need a slightly different mousetrap to crack mass grocery than trying to turn Whole Foods into that mousetrap,” said Bryan Gildenberg, founder of commerce consultancy Confluence Commerce. Amazon Go stores introduced shoppers to its Just Walk Out technology which let consumers enter a store, grab what they want, and pay for an item without stopping to check out. Then, Amazon tried its hand at a new grocery store format in 2022 when it opened Amazon Fresh, which now has 42 stores. The e-commerce giant opened its Go convenience stores in 2018, which eliminated checkout counters. However, these experts said that Whole Foods still can fill a need for Amazon by serving the top end of the grocery market.Īfter acquiring Whole Foods in 2017, Amazon focused its efforts on technological innovation in grocery. Thus, it remains to be seen what role Whole Foods plays in Amazon’s grocery portfolio going forward. Ultimately, it appears that Amazon is looking for a new grocery format outside of Whole Foods that has mass appeal, cheaper pricing and can ultimately be automated. While Whole Foods covers a premium niche in the overall grocery space, consultants and other retail industry executives said the chain doesn’t really serve the mass market in the same way as rivals Kroger or Albertsons. Historically, Amazon has found it difficult to make sense of the upmarket grocery store Whole Foods Market, which it acquired six years ago.
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