People walk past an Amazon Fresh store in Washington, DC on August 26, 2021.
Nikolai Kamm | AFP | Getty Images
Amazon plans to close some Fresh supermarkets and Go convenience stores as the e-retailer reviews its grocery strategy and looks for opportunities to cut costs.
“We are constantly refining our store formats to find those that will resonate with customers, build our product brand and allow us to scale significantly over time,” said Brian Olsovsky, Amazon’s chief financial officer, in the company’s fourth quarter. earnings call on Thursday.
Olsavsky said that as part of a periodic evaluation of the product portfolio, the company “decided to leave some stores with low growth potential.” As a result, the company took a $720 million impairment charge in the fourth quarter, he said.
Amazon will also temporarily halt expansion of its Fresh line of grocery stores until it finds a format that differentiates the company’s offering from others in the industry. CEO Andy Jassy said on an earnings call that Amazon’s stores need to resonate with customers and the company needs to be in a position “where we like the economics.”
“We’re optimistic we’ll find it in 2023,” Jassi said. “We’re working hard on it. We’re seeing some encouraging signs, and if we find that equation, we’ll expand it even further.”
Amazon reported better-than-expected fourth-quarter earnings on Thursday, but issued a disappointing first-quarter outlook. The company just finished its weakest year of growth in a quarter century as a public company and is cutting costs after a long period of outsized expansion.
Amazon currently operates several dozen Fresh grocery stores and 28 Amazon Go stores, according to its website.
In December, The Information reported that several Amazon Fresh brick-and-mortar stores in the U.S. were sitting empty, signaling a pullback in the company’s grocery strategy.
Amazon has been determined to crack the grocery segment since launching its fresh produce delivery service in 2007. It made a historic splash when it bought upscale grocer Whole Foods Market in 2017 for $13.7 billion, Amazon’s largest acquisition in history.
Amazon’s mix of grocery offerings has become increasingly complex once it launched its Go line of cashless stores and its Fresh supermarket chain, aimed at the average shopper. Jassi said he remains bullish on Amazon’s grocery business and is pleased with Whole Foods’ profitability progress over the past year.
“It’s good business for us in the grocery space,” he added.
Under Jassi, who will succeed Jeff Bezos as CEO in 2021, the company has taken cost-cutting measures in its product division and elsewhere as it grapples with slowing sales and a bleak economic outlook. Amazon’s plans to cut 18,000 jobs, announced this month, include cutting much of its product portfolio.
In March last year, Amazon announced that it would reduce its physical store portfolio by closing all Amazon Books, 4-Star and Pop Up stores. The company also added a delivery fee to certain orders placed through Amazon Fresh online and a service fee for Prime members who want home delivery from Whole Foods.
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