Amazon.com Inc, the online retailer that has long been feared of disrupting the grocery industry, believes it has fallen short.
Chief Executive Andy Jassy said on Thursday, in a rare appearance on the company’s quarterly results call, that the company has paused expansion of its Fresh supermarkets and cashier-less convenience stores until it finds the right recipe for success.
Before embarking on a major expansion, the company requires a distinct store format that is profitable, which Amazon hopes to find this year.
The comments demonstrate how Amazon, which only a year ago announced that it would close its bookstores to focus on grocery, has yet to dominate brick-and-mortar retail since its closely watched acquisition of Whole Foods Market in 2017.
Amazon has long regarded grocery as a key to increasing consumer spending.
Rival grocers such as Kroger Co and Walmart Inc remain formidable competitors. Despite Amazon’s large business in packaged food and other goods, Jassy believes the company has yet to gain a significant market share in perishables.
Wedbush Securities analyst Michael Pachter believes Amazon is to blame because it drew consumers to online shopping decades ago.
“Retail is a tough business,” he said. “They are flushing money down a toilet pursuing Amazon Fresh stores” and thinking “they can brand a new concept and capture share from retailers who have been successful for decades.”
According to Jassy, the future of grocery is both online and offline, or omnichannel.
He stated that while Whole Foods is expanding and remains the market leader in premium, organic grocery, Amazon’s mass-appeal offering needed improvement.
So far, the company has a few dozen Amazon Fresh locations, according to Jassy. It has also experimented with technology that charges customers for what they take from a store without requiring them to pass by a cash register.
For the time being, the company has closed some grocery stores and reduced the value of certain assets. According to its chief financial officer, such actions cost it $720 million in the fourth quarter.
(Adapted from USNews.com)