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Amazon's Sprawling Grocery Business Has Become an 'Expensive Hobby' With a Cloudy Future (cnbc.com) 74

Posted by msmash from the closer-look dept.
Amazon has spent almost three decades perfecting the art of bringing everything imaginable to your doorstep in the shortest amount of time, at the lowest possible price. By almost any measure, it's been one of the greatest corporate successes in history. But despite Amazon's unquestioned dominance in e-commerce, one giant market has proven particularly vexing: groceries. From a report: Amazon has introduced a dizzying array of services -- Prime Now, Fresh, Go and others -- in its effort to become a giant in the $750 billion U.S. grocery market. In 2017, it spent $13.7 billion to acquire Whole Foods, a price tag more than 10 times higher than Amazon had paid in any prior deal. Still, it's just a niche player in the industry. As of mid-December, Amazon.com and Whole Foods accounted for a combined 2.4% of the grocery market over the past 12 months, while Walmart controlled 18%, according to research firm Numerator. Amazon's delivery services have struggled to stand out in a crowded field, while the Go automated convenience stores have been deprioritized, according to people familiar with the company's strategy.
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Amazon's Sprawling Grocery Business Has Become an 'Expensive Hobby' With a Cloudy Future More

Amazon's Sprawling Grocery Business Has Become an 'Expensive Hobby' With a Cloudy Future

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  • Whole Foods isn't the low price leader... (Score:1, Interesting)

    by Anonymous Coward

    The only reason why I ever buy anything at Amazon is because it's cheaper there than I can get elsewhere.

    Why did Amazon buy Whole Foods? They're not a low price leader. I think some overpaid vegan hipster executive made a big mistake at Amazon when they decided to buy up Whole Foods. Should have bought Costco or something else instead.

    • Re:Whole Foods isn't the low price leader... (Score:5, Interesting)

      by fermion ( 181285 ) on Tuesday February 22, 2022 @03:45AM (#62291063) Homepage Journal
      Whole Foods has around $15 billion in sales with around $500 million profit. This is about 50% higher than average grocery stores. Fresh food sales are Walmart is probably a loss leader. Whole Foods was not a good fit for Amazon because Whole Foods is about service. No one wants 20 brands of peanut butter, just well stocked items and fresh baked goods. Whole Foods sold because meeting customer demands became expensive.

      Like Apple and Samsung, profit is king as selling product at a loss is not sustainable. Amazon has a real problem with supply chain issues. People will stop looking if the stuff they want is not there. Consumers who are sensitive to price and has transportation will always shop for the best deal. Consumers who have to buy a little at a time will go to the dollar store.

      • Whole Foods has around $15 billion in sales with around $500 million profit. This is about 50% higher than average grocery stores. Fresh food sales are Walmart is probably a loss leader. Whole Foods was not a good fit for Amazon because Whole Foods is about service. No one wants 20 brands of peanut butter, just well stocked items and fresh baked goods. Whole Foods sold because meeting customer demands became expensive.

        Like Apple and Samsung, profit is king as selling product at a loss is not sustainable. Amazon has a real problem with supply chain issues. People will stop looking if the stuff they want is not there. Consumers who are sensitive to price and has transportation will always shop for the best deal. Consumers who have to buy a little at a time will go to the dollar store.

        Actually, right now, with the recent massive inflation and supply chain issues, Whole Foods prices on many things are similar or better than the grocery store. And Whole Foods (at least, the one near us) has been better stocked than the regular grocery stores too. I guess the organic supply chains are different.

        We are the farthest thing from granola munchers, but we have eyes. And stomachs to feed ...

        • My guess is that organic is often a proxy for sustainable. And that the sustainability of the supply chain leads to better resilience against interruption. Just a guess though.

          The alternative is organic is simply higher margin, so the supply chain wasn't overly optimized to our pre-COVID economy.

          • Naw, organic stuff still get packaged in plastic. Very weird to see a frozen organic/vegan/gluten-free/healthy product in a disposable plastic bowl.

    • Re: (Score:2, Insightful)

      by AuMatar ( 183847 )

      Amazon is rarely the cheapest option these days. But it is convenient to use and provides a decent baseline customer service, which is why I use it.

      But their grocery delivery- I use grocery delivery almost exclusively, living in NYC. I tried to use Amazon. They only offered organic milk at $10+ a gallon. I can get non-organic (which is every bit as good, organic has no actual meaning and doesn't prevent them from using some nasty ass chemicals) for under $4 anywhere else. I can even use a service like

      • Re: (Score:2)

        by v1 ( 525388 )

        Amazon is rarely the cheapest option these days. But it is convenient to use and provides a decent baseline customer service, which is why I use it.

        I've been an Amazon customer for several years, and as my online purchasing picked up steam I decided to get Prime to save on shipping costs.

        I do some pretty aggressive comparison shopping when looking for products online, even small things that are arguably a waste of my time to research. Amazon definitely saves me money in most cases. There are a few excepti

        • Re: (Score:2)

          by ncc74656 ( 45571 ) *

          I don't know if Pirme still advertises "2 day shipping" in print anymore. It seems that more and more of my Prime purchases are taking quite a bit longer to get to me.

          It's just another anecdote (vs. yours), but if anything, I'm more frequently seeing next-day delivery a fair bit of the time. I've even seen an overnight-delivery (at your doorstep by 8 AM) option occasionally, and used it once...ordered some containers mid-evening, they showed up by the time I got up the next morning.

          • Re: (Score:2)

            by hawk ( 1151 )

            while we're anecdotallating . . .

            I've seen Walmart shipping (not delivery) show up at my door within two hours of placing the order.

            In fact, the first thing they dropped from the store was two hours later and before I knew they were doing such things . . .

            Walmart generally gets things here faster than amazon (even when not dropping from a store), and at the same or lower price.

            I just wish I could set a couple of preferences to be automatic (no, I don't want their "pro sellers" who charge 4-10 times market p

        • Everything i see is twice as expensive as aliexpress or similar

          • Re: (Score:2)

            by v1 ( 525388 )

            You need to spend some time looking around, the same item is usually listed by several sellers.

            And you won't always find the best deal there. I generally check Amazon, eBay, AliExpress, and Walmart online stores for anything that's worth my time to shop around for. I only get things off Ali when I'm not even slightly in a hurry for them, as it usually only saves me a very small amount in exchange for getting it in 6 weeks rather than 6 days.

            Amazon: I want it cheap and fast, but I have time to carefully lo

    • The only reason why I ever buy anything at Amazon is because it's cheaper there than I can get elsewhere.

      Why did Amazon buy Whole Foods? They're not a low price leader. I think some overpaid vegan hipster executive made a big mistake at Amazon when they decided to buy up Whole Foods. Should have bought Costco or something else instead.

      Actually, with the current inflation and supply chain issues, we've noticed that Whole Foods prices on many things are comparable or better than grocery stores. . We weren't looking for that, just encountered it. Surprised us, really.

    • Re: (Score:2)

      by dbialac ( 320955 )
      Costco has incredibly narrow margins. They literally sell at cost. Their profit margins come entirely from their membership fees. That said, most people want to pick out their own fresh foods, not have somebody else pick them out. This is why delivery and carry out services fail. The radically increased in popularity during COVID, but now their use has plummeted as people have returned to going in the store and picking things out. A friend of mine has had to give up working for Door Dash as he doesn't get o

    • Was it real estate and a lot of good locations?

      Amazon seems to go in fits and starts with brick and mortar aspirations and service enhancements, such as Amazon lockers.

      I kind of doubt it was for the generic grocery aspect, although it wouldn't surprise me if there was some idea they wanted to play a bigger role in the world of organic/sustainable/etc foods for some long-term idea.

    • Re: (Score:2)

      by sconeu ( 64226 )

      Why did Amazon buy Whole Foods?

      Because the Whole Foods demographic is "Suckers with too much money".

  • against competitors that are also paying slave wages, already. (Or so I understand...)

    Ok I understand he's probably going for the dollar signs in the upscale, concierge/convenience market. There's already services for that, so it's not like wow what innovation.

    Maybe put a data center there to keep pre-cooked chicken meals warm. Yeah, that's the ticket. Synergy.

    • Amazon should just buy Costco and sell their stuff on the Amazon website. It's pretty much the in person equivalent of the Amazon business model before Amazon was Amazon. Being able to buy all my Costco online with the convenience of the Amazon delivery would be great!

      • Dolla Dolla General, y'all.

        Another poster higher up touched on it. Dollar General is building stores in rural America at a surprising rate. Here is an article from 2018, and progress has only increased since then.

        According to data from GlobalData Retail, 75% of the US population is now within five minutes of a Dollar General store.

        https://www.businessinsider.co... [businessinsider.com]

        And that was three years ago. With a blue delivery truck leaving from everyone of those 15,000 locations, Amazon could make two hour delivery happen for ordinary humans, not just the lucky enough to live in the shadow of a Whole Foods.

        You heard it here first. A

      • Maybe acquiring Whole Foods was a learning & expertise building project for them? Who's to say they don't have a next move in the works, maybe something as big as Walmart or Costco but with the usual 'latecomer advantages'?
      • No just no, Costco treats its employees pretty well. I seriously doubt Jeff would continue that. I'd cancel my membership.

        • Re: (Score:2)

          by sconeu ( 64226 )

          This is one of the main reasons I go to Costco. I appreciate a store that does this.

    • against competitors that are also paying slave wages, already. (Or so I understand...)

      Yeah I remember when Safeway (at least the nocal division) gave all the people with a clue a bonus to take early retirement, before their retirement fully vested. Everything went fully to shit.

  • Amazon kind of sucks (Score:3, Funny)

    by Spugglefink ( 1041680 ) on Tuesday February 22, 2022 @03:48AM (#62291069)

    Order today, get FREE PRIME SHIPPING wuhoo wuhoo wuhoo! Receive your items in 6-8 weeks. It's just like ordering stuff out of the back of a comic book in the '80s.

    As to food, nothing I've tried to order from them has even been available.

    Color me not impressed.

    • I've cancelled so much shit after I realized "free prime shipping" was no longer the same as two day delivery

    • Yeah, I wonder if their service is quite a bit different in the US. Here in the UK I find their website annoyingly cluttered and it can be quite difficult to find something when you know exactly what you want (e.g. part for bicycle), as it seems to always be trying to sell me a different part with no idea that they are not the same thing. I also tend to find their pricing is almost never the most competitive, and there is almost always a specialist supplier who can deliver it next day for approximately the

      • They used to be cheaper by about oh, say 20%, than the competition. Then when the wide scale tax abuse was stopped somehow the prices equalised.

        It seems that Amazon's main advantage was tax avoidance.

      • Amazon is optimized for you to buy something. Not necessarily the thing you want though. Amazon.com has a cluttered nonsensical UI, but it's scientifically tested and optimized, so it's tough to argue it's a bad one.

        • Amazon.com has a cluttered nonsensical UI, but it's scientifically tested and optimized, so it's tough to argue it's a bad one.

          It's easy to argue that it's a bad one. It is a bad one.
          Compare it to newegg, where you can select the kind of product and drill down to everything that exactly matches what you want.

      • Yeah, I wonder if their service is quite a bit different in the US. Here in the UK I find their website annoyingly cluttered and it can be quite difficult to find something when you know exactly what you want (e.g. part for bicycle), as it seems to always be trying to sell me a different part with no idea that they are not the same thing.

        No, that's exactly how it is here too. They've always had disorganized mess instead of a functional way to find things on their site.

  • Amazon, at the end of the day, is a shipping/logistics/supply chain management company with a web frontend (at least if we expand that to include managing server capacity as well). But they haven't really entered the grocery business in a significant enough way to bring that expertise to bear.

    Yes, grocery stores are also fundamentally about supply chain management so it's an obvious market for amazon to expand into but they either need to go big or go home. Whole foods is a niche high end grocer. If they aren't going to buy one of the big supermarket chains so they have enough volume to substantially reduce costs they are never going to be able to compete with walmart hiring a few people to drive groceries to your house.

    And even if they do it's not clear they can outcompete walmart/kroger/etc.. The retail shopping market that amazon entered had a ton of unnecessary costs (stores, associates etc.. etc..) they cut out but I'm not sure the grocery store market has that much fat to cut (absent eliminating the physical stores entirely but, again, this isn't something they can really do piecemeal and they don't appear to be making a big enough play to try it).

    • Re: (Score:2)

      by JBMcB ( 73720 )

      Yes, grocery stores are also fundamentally about supply chain management so it's an obvious market for amazon to expand into but they either need to go big or go home.

      Grocery stores are all about supply chain management, but it is a fundamentally different system than what Amazon does. With grocery stores, you have large, nation-wide distribution networks for suppliers, along with regional and local networks that you have to work with. Because, you can't sell milk produced in Vermont in Oregon. It would have to sit on a truck for too long. Also, liquor, wine and beer sales work differently in every state. So you have networks of smaller supply chains as well as nationwid

    • I dunno about the US, but in the UK, the major supermarkets most definitely know the business they're in. They're actually damn good at what they do - they all have their own "niche" of price/range/quality or whatever, and they all play to that niche very very hard. People in the UK are somewhat partisan about what supermarket they use - there's a definite social pecking-order, and we're all somewhat loyal to whomever we use.

      Enter Amazon... Personally, I'd rate Ebay as the shittiest online store of them all

  • Amazon racing themselves to the bottom? (Score:5, Insightful)

    by bradley13 ( 1118935 ) on Tuesday February 22, 2022 @07:38AM (#62291321) Homepage

    I just placed an order for a product from Amazon. The experience reminded me of why I rarely do so anymore.

    I wanted a product (a professional level knife sharpener), but I didn't know which products were good, and which were not. It used to be that you could browse the products on Amazon, read the reviews, and make a selection. That hasn't been the case for a few years now, because you know that (a) many of the products crappy knockoffs or outright counterfeits, and (b) you can't trust the reviews. So I did research elsewhere, and figured out which product I wanted. I would have ordered elsewhere as well, but couldn't find a supplier who would deliver to Switzerland. So, unfortunately, I had to order the product through Amazon.

    Groceries? I cannot imagine ordering groceries from Amazon. Local grocery stores, whom I actually trust, have their products online. If I don't want to shop, I can order ahead for curbside pickup, or they have their own delivery services. Why in the world would I order groceries from Amazon? Given their obvious tolerance of counterfeit products and fake reviews, I surely do not trust them to deliver my food.

    Seriously, they need to get some quality control into the products they sell, and the companies that sell them. They are currently in a race to the bottom, apparently against themselves. Looks like they are going to win the race :-/

  • during pandemic amazon delivery was quite good (Score:3)

    by TheGratefulNet ( 143330 ) on Tuesday February 22, 2022 @08:22AM (#62291373)

    I did not want to go out and this was the first time I tried grocery delivery. there was a 5-7am option that I always picked and for the most part amazon did get into my apartment building ok each time and put the groceries right at my front door in the common hallway. frozen stuff was put into space age (silvery!) insulated bags and they did a great job. that was at the height of 2020.

    now, I mostly dont bother since they dont seem to take things seriously anymore. frozen stuff is no longer put into special insulated sacs. they forget things or bring wrong things 1/10 of the time.

    wish they'd keep up the good work but I'm sure its a labor issue. no one wants to DO this job and only those that had to, did it.

  • Amazon Fresh (Score:3)

    by waspleg ( 316038 ) on Tuesday February 22, 2022 @08:23AM (#62291377) Journal

    is very hit or miss. I certainly don't trust them enough to order their house brand of things like beef, especially when half of them have the name "Happy Belly" which sounds it came out of the alley behind the sketchiest Chinese place in town.

    They lie about delivery windows, even if you pay extra for the 1 hour one. They lie about item availability right up until only half of your order shows up - like, don't try to sell me shit you don't even have.

    Then think they're great because they gave you a refund, that's the bare minimum, you wasted my time and now I have to get the missing shit from somewhere else.

    Shipt (Target owned) costs more, but their item availability depends on the manager at a given store not sucking vs Amazon's shell game (remember Amazon is in control of their whole vertical chain, inventory lies are inexcusable as a result, my opinion anyway), so overall they're better despite a membership fee. They also do background checks, I don't know if Amazon Fresh does, but having seen the people that come, I highly doubt it, it may well be "white box" delivery from one of the shit show gig delivery places like doordash.

  • I would never, ever, ever buy produce online and have it shipped to me. Ever. I'm guessing this is true for most people. Have you ever purchased an Avocado? I eat a lot of them. They are notoriously difficult to find at just that right level of ripeness. I need to be in the store and see those babies in person. The same with bananas. The same with lots of, if not all of the fruits and vegetables I buy.

    If you live in an area that has a year-round selection of "farmer's market" vendors, getting non-produce it

    • Re: (Score:1)

      by Anonymous Coward

      I agree with the basic idea of what you are saying: fresh produce is better. But the two items you chose to use as examples, avocados and bananas, are the two items which do the best, by which I mean suffer the least, when picked early and ripen at the consumer. There's almost no need to pick a perfect avocado if you're willing to buy one and wait a few days before eating it. Same for bananas.

      Now, if you had used tomatoes or melons as your examples, the argument would have been much stronger. There's an

      • I'd disagree on melons, which are equally vile no matter how they were ripened.

        But the rest of what you say is essentially correct. The advantage to shopping in person for avocados is if you're looking for one that you can take home and eat that day. You can't do that online. And finding a good tomato at a grocery store is a near-impossibility, you're only going to get a good one at a farmers' market or if you grow it yourself.

  • Hmm (Score:3)

    by cascadingstylesheet ( 140919 ) on Tuesday February 22, 2022 @09:08AM (#62291431) Journal

    As of mid-December, Amazon.com and Whole Foods accounted for a combined 2.4% of the grocery market over the past 12 months, while Walmart controlled 18%, according to research firm Numerator.

    That's ... actually pretty amazing success for a 90s online bookstore?

    • Re: (Score:3)

      by EvilSS ( 557649 )
      Yep. And 2.4% is probably on par with their footprint as well. I've got 3 or 4 Walmart stores within 5 miles of my house, and 0 Whole Foods. I live in the metro area of a decent size city and there are only 3 Whole Foods in the entire area. So 2.4% seems reasonable.

    • Re: (Score:2)

      by BenBoy ( 615230 )

      That's ... actually pretty amazing success for a 90s online bookstore?

      Agreed. FWIW, it's one of the reasons I won't shop there. I miss the thriving bookstores, and I'll miss the thriving local grocers.

  • I generally don't shop at Whole Foods, primarily because their prices are much higher than other stores here. So, here's the story... For Valentine's Day, I saw a deal on roses on Amazon that was incredibly cheap...two dozen for $20. I placed that order, along with some juice, raspberries, blueberries, and strawberries, for a total of around $40, and including two hour delivery. All of it clearly came from the local Whole Foods, and while the fruit was excellent, the flowers were some of the best I'd se

  • One of the big attractions with Whole Foods, in my opinion, is the in store experience. It just looks and feels different than other grocery stores. And it is part of the reason they can get away with charging such high prices. The customers that are loyal to Whole Foods believe they are getting their moneys worth. It's much like Starbucks or Apple. They are selling the sizzle as well as the steak.

    When you move those grocery products online it loses some of the sizzle. You lose the ambiance. I think that's

  • is forcing people on wic / ebt / etc to get prime the end game? and in the that game the government will be picking up the tab for the prime sub.

  • Especially because of poorly thought out searching.
    You can do a search for 3 different foods, find Amazon has all of them but only on different services. So you had to pay far MORE money. Either you had to sign up for multiple services or have to satisfy 3 different "minimum cart for free shipping", or just pay shipping three times.

    Moreover managing to fill a cart with the minimum # is hard because you can't search just within that service.

    Combine them all into one single service and I will try it. As is

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