‘Groceries were a mistake,’ expert tells Amazon after online retail giant forced dozens of physical stores to close

AMAZON should stick to its best offerings – online products – as trying to break into the grocery market has not been as successful, an expert said.

Amazon’s cashierless payment system, Just Walk Out, was intended to revolutionize physical stores but failed to achieve the expected impact, among other grocery ventures.

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Jake Dollarhide, analyst and co-founder of Longbow Asset Management, spoke about Amazon’s bold decision to enter the grocery market.

“Some people would consider your foray into groceries a mistake, and that would be fair, to a point,” said Dollarhide, Seattle Times reported.

“They’ve had more closures, restarts and renovations than they’ve actually introduced concepts at this point.”

Dollarhide also called Amazon’s grocery business an “expensive hobby,” he said CNBC in February.

“Nothing has changed since day one for Amazon groceries,” Dollarhide recently continued, according to the Seattle Times.

“Everything remains in flux.”

FIGHTS IN THE GROCERY STORE

Amazon recently decided to remove Just Walk Out from Fresh supermarkets, closed dozens of stores, halted expansion of new stores and reformatted others.

Other recent changes to Amazon’s grocery business include laying off employees, shelving drive-up pickup locations and experimenting with new subscription models for online shoppers.

Amazon launched Fresh in 2020 and quickly expanded to 44 stores within two years.

The company has since closed three U.S. locations, including one in Seattle’s Capitol Hill neighborhood, according to the Seattle Times.

It also planned to halt expansion of Fresh stores last year.

Despite the changes, Amazon remains committed to its grocery efforts, including Amazon.com, Amazon Fresh, Amazon Go and Whole Foods Market.

However, analysts are skeptical about its success in the competitive food market, according to the Seattle Times.

“We remain optimistic about what we are doing in the grocery sector,” Amazon CEO Andy Jassy said on a conference call with investors in April.

“We have many ways to continue to help customers satisfy their shopping needs.”

Amazon’s entry into the grocery business began nearly two decades ago with online nonperishables and expanded with Amazon Go, Fresh stores and the acquisition of Whole Foods in 2017.

Amazon’s share of the grocery market remains small compared to competitors like Walmart, Kroger and Costco.

Walmart currently leads in both total grocery spending and e-commerce grocery sales.

Analysts like Sucharita Kodali of Forrester believe that Amazon is not a significant player in fresh foods and that traditional grocery chains like Kroger should not view Amazon as a major threat, according to the Seattle Times.

Amazon’s online grocery sales, while growing, still lag behind Walmart’s.

The introduction of Just Walk Out technology in 2016 was a notable innovation, but it didn’t lead to the widespread transformation that Amazon envisioned.

Industry observers and analysts remain skeptical about Amazon’s long-term success in the low-margin grocery sector.