Amazon is pulling out of the grocery store business, sort of. The online retailing giant plans to close its Amazon Fresh and Amazon Go stores. It will focus instead on expanding Whole Foods and its online grocery business.
Amazon has conquered a lot of retail segments over the years, laying waste to smaller competitors. But food retailing is a different animal.
The modern American supermarket industry began after World War II, operating on the principle that large volume could make up for very low profit margins on items sold.
That model requires careful inventory management and pricing strategies since so much of a food retailers product can rot on the shelf if it doesn’t sell quickly.
In meat and poultry, an industry I wrote about for many years, it’s called “sell it or smell it.” That means if you don’t sell the products soon, they will stink, and lose you money.
Food retailing also requires point-of-sale marketing pizazz; you have to convince people to buy more than sale items to make any money off them.
I visited an Amazon fresh store in my area several times. It was dark and dead-looking inside with none of the excitement of a traditional supermarket.
Walmart has mastered the food retailing business. It ranks as the largest food retailer in the country. Kroger, a traditional supermarket chain, is number two and wants to be the surviving traditional chain when the dust settles in the segment.
Target, which has tried for many years to become a food powerhouse, ranks seventh, noteworthy but not overwhelming.
Amazon seems to think direct online food sales will be its future. Delivery is always the hangup with such sales. Home delivery is labor and cost-intensive. But maybe self-driving electric delivery vehicles will someday change that cost equation.
Until then, it seems that traditional supermarkets, and Walmart, have beaten back Amazon in food retailing, for now at least.
