Amazon revolutionized the world of electronic commerce long ago, but the Seattle-based company still appears not to have gotten the hang of selling groceries at bricks-and-mortar locations.
Retail and supermarket experts said this week's announcement that locations in Westport and Brookfield, which were once expected to become Amazon Fresh stores, are evidence that the e-commerce giant still has some work to do when it comes to selling food and other supermarket staples. The two Connecticut locations will now become Big Y stores, officials with the Springfield, Mass.-based supermarket chain said.
The two stores Big Y will open in Brookfield and Westport, in addition to new locations that will open in Middletown as well as Westborough and Uxbridge, Mass., will bring the total number of Big Y locations to 77, company officials said.
For a time, Amazon Fresh was eagerly anticipated by Connecticut consumers and viewed by some as cutting edge grocery shopping. The stores use state-of-the-art technology that replaces checkout lines with wireless technologies that charge customers as they walk out the door with the items they purchase.
But in February 2023, Amazon executives began pausing any new openings of Amazon Fresh locations while they tinkered with unspecified elements of the business model. Company officials still haven't said in any detail what the future holds for the Amazon Fresh concept, including a location that was reportedly under development for the company on the Boston Post Road in Orange.
But several supermarket and retail experts said the abrupt halt to the chain's expansion is evidence that the concept was not adequately vetted before being rolled out in a number of major metropolitan areas around the United States as well as in Connecticut.
"I think their people looked at how the investment in technology and the technology itself was going to play out and came to the conclusion that this was not going to have the profitability level they needed to have in order to continue going forward," said Wayne Pesce, president of the Connecticut Food Association, a Hartford-based trade group that includes many of the state's largest grocery chains. "These Amazon Fresh stores are very futuristic and I'm not sure that they had all the kinks worked out. They nay not have been getting the numbers they needed to break even."
Jessica Martin, an Amazon spokeswoman said, the company will continue to open new Whole Foods Market stores, and will do so selectively with Amazon Fresh "as we see results we like."
"Like any retailer, we periodically assess our portfolio of stores and make optimization decisions that can lead to closing existing locations or choosing not to pursue building a planned location," Martin said. "We’re encouraged by early signs of our new store design in Chicago and Southern California, and will proceed adaptively.”
Another factor working against the Amazon Fresh concept may have been that grocery shopping is still a business that is deeply rooted in the senses. Grocery store operators across the country continue to invest heavily in creating visually pleasing presentation of foods where consumers can touch fresh produce, smell bread baking and view seafood and meats being cut to order.
"It's absolutely important," David Cadden, a professor emeritus at Quinnipiac University's School of Business, said of the sensory component in grocery shopping. "People respond to the visual, the olfactory, the tactile. The smell of an bread baking in a grocery store has been shown to increase the sales of food product."
Pesce said consumers "have a certain expectation when they go into a grocery store."
Amazon first entered into the grocery business in August 2017 when it acquired upscale grocer Whole Foods. The Amazon Fresh concept was launched in earnest three years later.
Burt Flickinger, managing director of the New York City-based retail consulting firm Strategic Resource Group, said when Amazon Fresh was first launched, "it was highly successful and was an easy, efficient shopping experience"
"When they first opened in any market, they'd start a price war with any other chain in order to gain market share," Flickinger said. "But as the pandemic progressed, there was a massive supply chain disruption and massive price spikes that hurt them. Even today, food prices are still 20 percent over where they were before the pandemic."
Another factor that may have derailed the Amazon Fresh business model, he said, were changes in management with those running the business.
"A new group of business bureaucrats came in to run Amazon Fresh and so they weren't a willing to offer as many specials," Flickinger said.
Amazon Fresh also suffered when the focus of the management team that also oversaw Whole Foods operations shifted to problems with Austin, Texas based chain. he said.
"The biggest challenge right now is fixing the Whole Food concept," Flickinger said. "Whole Foods used to be ahead of the pack when it came to things like organic produce and general operations, but now the rest of the industry has caught up."
He said Whole Foods executives need to do a better job negotiating prices with suppliers so the chain can be more competitive with industry rivals in terms of attracting price-sensitive customers.
"Right now, Whole Foods is simply not competitive," Flickinger said.
Whole Foods has 11 Connecticut stores, recently opening a location in South Windsor earlier this month.
Once Amazon executives are done tweaking Whole Foods' operations, he said they will then be able to turn their attention to Amazon Fresh.
Amazon continues to have a large online grocery business where consumers can buy millions of products available for delivery. But in order to compete with pure-play supermarket chains that have been in business for decades, company officials said they need to continue building out a physical presence.
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