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Amazon halts expansion of self-checkout supermarkets
Amazon has halted the aggressive expansion of its checkout-free convenience stores, amid disappointing sales and a bleak economic outlook
www.thetimes.co.uk
Amazon halts expansion of self-checkout supermarkets
Amazon Fresh stores operate similar technology to that used in driverless cars
Sam Chambers
Sunday August 21 2022, 12.01am BST, The Sunday Times
Amazon has halted the aggressive expansion of its checkout-free convenience stores, amid disappointing sales and a bleak economic outlook.
The US giant is understood to have walked away from talks on dozens of sites for new hi-tech Amazon Fresh stores, and to have called off the search for more locations. There will still be a handful of openings this year at sites where Amazon had already committed to a lease.
Its first checkout-free store in the UK opened in March last year, in Ealing, west London. Since then, it has opened another 18 stores, predominantly in the capital.
One source close to the project said sales at most of the stores had fallen short of expectations and that the fit-out costs are multiple times higher than with a standard convenience store.
To dispense with the need for checkouts, Amazon Fresh stores operate similar technology to that used in driverless cars. As shoppers approach, they open an app on their smartphone and scan a QR code at the entry gate. Once inside, Amazon uses machine-vision technology to record what they have taken off the shelf and put in their carrier bag. When shoppers have grabbed what they need, they walk out and Amazon bills them electronically. The stores sell a mix of common household brands and groceries sold under the “by Amazon” label.
A source close to Amazon said customers were enjoying the experience, and being able to collect or return orders from its website at stores. The company, which had targeted opening hundreds of Fresh outlets, is said to be looking to revisit its expansion plans for the chain in 12 to 18 months. A spokeswoman said: “We look forward to opening additional Amazon Fresh stores in the near future.”
For now, though rampant inflation and waning consumer demand are spurring Amazon to slash costs and hike prices. The number of Amazon Prime subscribers in the UK dropped by 590,000 in the second quarter alone, according to research commissioned by industry regulator Ofcom. From next month, the cost of an annual Prime subscription is rising from £79 to £95.
Meanwhile, Amazon is contending with worker unrest in its distribution centres after handing out pay rises of as little as 35p an hour — blasted as inadequate by unions in the face of inflation that has hit 10.1 per cent. In the second quarter, Amazon reported that worldwide sales grew by 7 per cent to $121.2 billion (£102.7 billion). The tech giant slipped to a $2 billion net loss.
The early problems with Amazon Fresh stores mark the latest setback in the Seattle giant’s push into the grocery market. Amazon shocked the industry when it announced the $13.7 billion acquisition of posh grocer Whole Foods in 2017, but the expected shake-up has not materialised.
The grocery sector is attractive to Amazon because of its size and the frequency of purchases. The idea was that if it could convince consumers to use it for their weekly shop, a Prime subscription would become all the more attractive.
So far, it has not turned out that way. Amazon began selling groceries online in the UK in 2016, but the take-up has been relatively modest. Despite being one of the largest companies in the world, it still does not have the infrastructure, grocery know-how or buying power of, say, Tesco or the discounters Aldi and Lidl.
Still, Amazon does have the deep pockets required to sustain losses as it tries to gain a foothold. Last year, it hired Tesco’s former chief operating officer Tony Hoggett to run its physical store operations globally.
In July this year, with the cost of living crisis beginning to bite, Amazon Fresh announced it would price-match Tesco on hundreds of everyday groceries. On Amazon, a bag of 38 chicken dippers is currently £3 and a pack of three large onions is just 65p.
