Amazon Shutting Down A Part Of Its Business
Amazon is closing its underperforming Fresh and Go store locations in order to cut costs following an unprofitable 2022.
Last year was brutal for many industries, including tech and some retail segments. And with recent financial news from Amazon, it looks like this year is not off to a better start. The e-commerce giant is poised to cut even more costs at the expense of employees and brick-and-mortar stores.
Wall Street eagerly awaited word of finalized 2022 financial performance for some big retail players. So, everyone was all ears last Thursday when Amazon held its fourth-quarter earnings call. The company actually ended the year in a better position than most analysts expected.
However, that news is only positive on the surface. Per CNBC, “The company just closed out its weakest year of growth in its quarter-century as a public company and is cutting costs after an extended period of outsized expansion.” And things aren’t looking up.
Amazon’s forecast for the first quarter is underwhelming…to say the least. So the company’s leadership decided to take a series of cost-cutting measures. One of those is a monster round of layoffs – 18,000, to be exact.
Next on the chopping block are two of its brick-and-motor concepts. The two in the cross-hairs are Go convenience stores and Fresh grocery stores. There are 28 and several dozen (respectively) currently open.
Both are part of Amazon’s overarching attempt to break into the grocery industry. It got started back in 2007 with the launch of Amazon Fresh. But the company really got a foothold into grocery when it acquired Whole Foods in 2017.
The following year, Amazon launched its Go convenience store concept in Seattle. This store model features a cashier-less shopping experience. And despite the nifty idea, it hasn’t taken off the way the company had hoped.
So Amazon plans to close a handful of Fresh grocery stores and Go convenience stores this year. Although, company leadership did note they would focus on the worst-performing locations. In addition, they will temporarily halt any expansion until they better assess the overall grocery industry.
Amazon tried to put a good spin on the dire financial news. The chief finance officer, Brian Olsavsky, said, “We’re continuously refining our store formats to find the ones that will resonate with customers, will build our grocery brand, and will allow us to scale meaningfully over time.” And “CEO Andy Jassy said on the 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.’”
However, Jassy acknowledged that Whole Foods is performing very well financially. And it sounds like Amazon has no intentions of fully exiting its other grocery endeavors. He said, “It’s a good business for us in the grocery space.”
What the future of grocery is for Amazon remains to be seen. With the recent cost-cutting measures taken by the retailer, along with other financial decisions, it may be a tough 2023. Customers certainly aren’t happy with some of the recent changes to their previously smooth Amazon shopping experience.
Now, “The company has also added delivery fees to some orders placed through Amazon Fresh online and a service fee for Prime members who want home delivery from Whole Foods.” And most customers have realized that the 2-Day Prime shipping promise is largely out the window. It will be interesting to watch where the financial winds blow the company this year.
