Monday, March 27, 2023

"Amazon Reports Mass Grocery Store Shutdowns As Business Starts Falling Apart"

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"Amazon Reports Mass Grocery Store
 Shutdowns As Business Starts Falling Apart"
by Epic Economist

"Amazon’s grocery business model is falling apart. Despite its global domination of the online shopping space, the largest e-commerce enterprise in the world, with an annual revenue of over $450 billion, is struggling to survive in one of the most prominent retail categories. And now mass store shutdowns and layoffs are being announced proving that the retail apocalypse is victimizing even the biggest companies in the industry. In fact, a new analysis shows that very soon Whole Foods, Amazon Go, and Amazon convenience stores may disappear for good from the U.S. economic landscape. There has never been so much pressure in the sector as retailers are facing right now. And the downfall of these food retail chains should be a wake-up call for everyone.

During the company’s latest earnings call, CEO Andy Jassy admitted that Amazon still hasn’t nailed down a successful model when it comes to the grocery sector. Jassy revealed that many locations are about to be closed and that the retailer is canceling plans to expand its chains until it figures out how to differentiate them from established competitors in the market.

This action came after its growth results showed figures that were significantly below expectations. Its Fresh supermarkets and cashier-less convenience stores saw a sales boom during the pandemic, but since the second half of 2021, foot traffic has sharply declined, and the company’s revenue is steadily shrinking.

In contrast, the online shopping giant is now having to introduce several cost-cutting measures to its brick-and-mortar business. Last week, Amazon revealed that it is postponing the construction of its second headquarters in Northern Virginia, Virginia, outside of Washington, DC. In January it confirmed plans to cut 18,000 jobs from its global workforce. And on Monday, Andy Jassy said in a memo to staff that the retailer is going to eliminate an additional 9,000 jobs in the next few weeks. The job cuts would mark the second largest round of layoffs in the company's history, bringing the 2023 total to 27,000. However, Jassy noted that Amazon is not done making final decisions on which roles will be eliminated, and in the next couple of months, more roles could be on the chopping block.

At the moment, the retailer is closing one-third of its Amazon Go stores. Meanwhile, Whole Foods Market, its natural and organic foods chain, announced that it is shuttering dozens of supermarkets in four states. The decision was made public right after Amazon reported that Whole Foods Markets faced the highest quarterly loss in seven years. Many industry analysts questioned the viability of the grocery chain.

In fact, according to analysts at Retail Wire, Amazon’s grocery business may not survive another 5 years, especially considering the threat of a severe economic downturn "There's no unique differentiation towards what they're selling, so it's a very middle-of-the-road concept," noted Rupesh Parikh, senior equity research analyst for Oppenheimer & Co. If they can’t figure out that model and how to do this business on thin margins, in 5 years, all of the stores could be gone,” the analysts forecasted.

When even such a massive and resource-rich company fails to adapt to the unforgiving brick-and-mortar retail sector, that begs the question of how smaller brands are really doing in such a troubled environment at this moment. Conditions for businesses are getting significantly worse and the pressure to keep up and stay afloat has never been so intense. But the red flags are starting to emerge everywhere, and unless Amazon reformulates its entire business model, its grocery store chains will continue stuck in a permanent limbo."
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