Are Amazon Fresh’s Revamped Stores the Differentiator CEO Andy Jassy Wants?

Amazon has been working to perfect the brick-and-mortar grocery experience since it acquired Whole Foods Market in 2017 and added its personal touch to food retailing when it launched the first physical Amazon Fresh store in 2020.

Headwinds in the space caused the e-commerce giant to pause its grocery expansion earlier in 2023 while it experimented with the format, but two newly revamped stores near Chicago are a sign that it is working back toward a promised expansion.

“We’re doing a fair bit of experimentation today in those stores to try to find a format that we think resonates with customers,” Amazon CEO Andy Jassy told investors on a Q4 2022 earnings call. “It [has to be] differentiated in some meaningful fashion and [we have to] like the economics. We’ve decided over the last year or so that we’re not going to expand the physical Fresh doors until we have that equation with differentiation and economic value that we like, but we’re optimistic that we’re going to find that in 2023.”

A potential example of that differentiated format may be seen at the two redesigned Amazon Fresh stores in the Chicago suburbs of Schaumburg and Oak Lawn, Illinois.

The locations have added hundreds of additional national and private label brands, with dairy, snacks, home care, health, and baking products seeing the largest additions. Customers can find new grab-and-go items, ranging from snack boxes to bake-at-home pizzas, as well as in-store Krispy Kreme Doughnut shops offering treats and coffee.

Families with children will benefit from kid-friendly shopping carts and stickers. Additionally, the stores will host family-friendly seasonal events and offer a new “Fruit Freebies for Kids” program that lets families take a piece of fruit from a special cart in the produce department.

The Amazon Fresh locations also feature the latest Dash Carts, which help customers navigate the store and can sense items placed inside to let shoppers skip the checkout line. The new cart models are allowed into the parking lot to maximize convenience.

While the revamped stores may be part of the equation Jassy is seeking, the retailer has not confirmed whether it is ready to return to growth mode.

The company eliminated hundreds of jobs at Amazon Fresh stores in late July, according to The Washington Post. Amazon, like the other tech giants has been cutting jobs across the board to rightsize its staffing after the pandemic-driven hiring surge. The number of layoffs hit a total of 27,000 as of late March, according to The Associated Press and other media outlets. As reported by CNN, other cost-cutting efforts earlier this year include the closure of eight Amazon Go convenience stores.

However, there are bright signs on the horizon for Amazon despite earlier setbacks. Net sales increased 11% year-over-year to $134.4 billion for Q2 2023, bringing the company to $6.7 billion in net income for the period. In comparison, Amazon posted a net loss of $2 billion for Q2 2022.

A healthier balance sheet could give Amazon the flexibility it needs to refocus on conquering grocery the way it did e-commerce, but Amazon Fresh will be competing for attention with a number of other internal businesses while off-price grocery competitors continue grabbing market share. Additionally, the company may wait for the results of Amazon One palm readers at Whole Foods locations to see if a tech-focused approach can provide the differentiator Jassy is looking for.