Yet in August of last year, we reported that Amazon had slammed on the brakes, due to sales falling short of expectations and fit out costs being multiple times higher than with a standard location.
According to a report by The Sunday Times, the US giant was understood to have walked away from talks on dozens of sites, and stopped its search for more locations.
In a LinkedIn post, Martin Heubel, an Amazon strategy consultant, said: “Not a major surprise amid the current economic climate. It’s expensive to get into retail and even more expensive to remain.”
“With inflation at all time highs, customers are prioritising to save money. Even the most advanced self-checkout technology won’t revert this trend in the short-term. It seems, Amazon has come to realise this, too.”
A spokesperson told RTIH at the time: “I can confirm that we will continue to open Amazon Fresh stores and look forward to opening more in the future.”
This has not happened, however, and now we’re seeing closures.
Brittain Ladd, a supply chain and retail technology consultant and former Amazon executive, says: “It’s not unusual for a retailer to close stores. However, what makes the closure of the Amazon Fresh store interesting is that it was using Just Walk Out technology.”
“I’ve stated many times that this technology will not increase sales, and the operating costs of the stores are still high.”
He adds: “In my opinion, Amazon continues to use the wrong business model in the UK. I won’t be surprised if it closes all of the Amazon Fresh stores.”
Ladd argues that there are three choices on the table:
1. Offer online only with no physical stores.
2. Offer online and acquire Morrisons.
3. Acquire Ocado. “I believe this is the best strategic decision. It will help Amazon grow in the UK through Ocado CFCs and Ocado Zoom. In addition, it will give Amazon ownership over Ocado’s strategy for Kroger and CFCs; a major competitor.”
Ladd concludes: “I anticipate that if Amazon attempts to acquire Ocado, Kroger will make the argument to Ocado that it has the first right to acquire Ocado. Either way, it’s a great deal for Ocado.”