Amazon Grocery Stores Are Struggling. Experts Say They Were Unprepared to Handle Grocery’s Thin Margins.

 

Amazon went big and bold with its diversified brick and mortar strategy when it bought Whole Foods and launched cashier-less Amazon Fresh and Amazon Go stores across the U.S. Turns out this may have been a miscalculation for the e-commerce giant. Amazon’s CEO, Andy Jassy, speaking on the company’s fourth-quarter earnings call, revealed that the company would delay opening more Amazon grocery stores until they figure out how to differentiate them from established competitors in the market. This action came after the company’s growth results showed figures that were significantly below what they saw during and shortly after the pandemic.

According to the report, Jassy also claimed that the company was ready to “go big” on brick-and-mortar stores and blamed a lack of normalcy during the pandemic for a series of missteps. He said Amazon is close to finding the solution and hopes to be back opening stores sometime this year.

Jassy’s remarks demonstrate that, despite Amazon’s announcement a year ago that it would concentrate on grocery sales and shut down its bookstores, they are yet to dominate the industry since its acquisition of Whole Foods in 2017. So why are Amazon grocery stores struggling despite the grocery market being a strong spending category generally? Lesley Hansell of Riverbend Consulting, small business consultant and expert Amazon seller, breaks down her takeaways from Amazon’s grocery pullback.

Lesley’s Thoughts:

“Amazon is sending out some mixed messages about the grocery category. So not long ago, the new CEO, Andy Jassy, said they are doubling down in grocery. Now it turns out that they are actually pausing development of some of their Amazon fresh grocery stores and shuttering some locations that they don’t think really have the opportunity to survive and thrive in the current economic circumstances. So why is Amazon having such a rough time in grocery?

Well, I’ve got a few theories. One is they thought that Whole Foods would give them the foothold that they need in the grocery category. But Whole Foods is not for the average consumer. Whole Foods is higher margins, more expensive products, premium products, and that isn’t the model for Amazon Fresh, which is for a more average grocery customer.

Secondly, let’s go back to those margins again, grocery stores traditionally survive on very thin margins. Amazon does not have a history of surviving on thin margins. That is not what the FBA program is about. It’s not what AWS is about. And here they are having to compete against Walmart and other grocery retailers who already have consumers in their pocket.

People want to go to those local stores to touch and feel the produce and the meat and there’s a big switching cost here to go to some new store that you’re not familiar with. A lot of folks never embraced Amazon’s grocery business online because of the premium pricing and not being able to choose produce. As long as they can’t figure out that model and how to do this business on thin margins, it’s going to be a while before they’re expanding the way they originally intended.”

Article written by Sonia Gossai.

Follow us on social media for the latest updates in B2B!

Image

Latest

talent
Grow Your Own Talent: How McDonald’s and Skilltrade Are Building a Culture of Lifelong Learning
October 7, 2025

The world of work is changing faster than ever. Automation is reshaping jobs, new technologies are rewriting what “qualified” means, and a new generation of workers is redefining what they expect from employers. From fast food to healthcare, companies are realizing they can’t just hire talent — they have to build it. They’re starting to…

Read More
The Tesla Test-How AI is Changing How We Search Video
The Tesla Test: How AI is Changing How We Search Video
October 7, 2025

In this episode of Secured, Mike Monsive sits down once again with Idan Koren, EVP of Marketing at Verkada, to discuss how artificial intelligence is transforming the landscape of physical security, operational efficiency, and the broader business of technology. The conversation begins with Verkada’s groundbreaking integration of natural language search in video surveillance —…

Read More
workforce education
Finding the North Star for Adult Learning: How UTI Is Redefining Workforce Education for Today’s Talent Needs
October 7, 2025

In a world where rapid technological change is redefining how we live, work, and learn, the demand for skilled labor and lifelong learning has never been higher. From electric vehicle repair to advanced diagnostics in healthcare, the U.S. faces a widening talent gap in the skilled trades and allied health industries. According to the…

Read More
child advocacy
Child Advocacy in Action: How CASA Sustains Impact Through Volunteerism and Vision
October 7, 2025

Across the United States, roughly 390,000 children are living in foster care, each facing the challenges of navigating the child welfare and court systems. Nonprofits working in this space carry the dual responsibility of supporting children’s emotional needs while also sustaining the funding and partnerships that make child advocacy possible. This raises a pressing…

Read More