Wirestock/Depositphotos.com
On Amazon’s first-quarter analyst call, CEO Andy Jassy said he remains “very bullish” about the company’s grocery business, particularly its recent progress in figuring out how to sell perishables.
His remarks were called out in an Amazon blog entry.
In the Q&A section of the call, Jassy first remarked that the size of Amazon’s grocery business is often underestimated. He said, “If you look at our center of aisle things — so these are things like consumables, canned goods, pharmaceutical items, beauty products, really, everyday essentials — if I just exclude Whole Foods Market and Amazon Fresh, we did over $100 billion in gross sales in our grocery business on these items last year alone. So it's a very significant business, and then I think we have a bunch of other areas that will allow us to grow in this area.”
He said Whole Foods, acquired in 2017, is “growing meaningfully faster than the grocery industry in general, with a really good profitability trajectory with the changes we've made over the last couple years and a great customer experience.”
The introduction of Whole Foods Market Daily Shop, ranging from 7,000 to 14,000 square feet compared to the typical 40,000 square feet, has also gone better than planned. He said, “Customers have really responded excellently to it.”
Whole Foods this past week opened its third Daily Shop in New York City, with more planned.
Jassy acknowledged that the Amazon Fresh banner needed a “broader, mass perishables offering” and has found some success with a revamp. He said, “We've been working on the second version of our physical Amazon Fresh stores, and those are showing meaningful progress in terms of what the performance looks like versus the first version of those Fresh stores.”
In early 2023, some Amazon Fresh grocery stores were closed, and openings temporarily paused as perishable sales underperformed.
Jassy added that at Whole Foods, “store within a store” concepts have been added to offer items the organic grocer traditionally hasn’t carried, “but that a lot of families want to shop when they do their weekly grocery shopping.”
He also highlighted a pilot project that launched last year, which involves building automated micro-fulfillment centers adjacent to Whole Foods locations. This test aims to allow Whole Foods shoppers to also purchase popular mainstream products from Amazon Fresh, as well as everyday essentials from Amazon.com.
Finally, he said Amazon has started adding a number of perishable items to some of its select same-day distribution facilities in Phoenix, Kansas City, and Orlando, and this has so far seen some “very promising” early success.
Jassy concluded, “So now, when you're getting those items that you get same day, you can add perishables, like eggs or milk, or bread, or yogurt. That experience is really resonating with customers. We're seeing very significant adoption, and I'm optimistic as we roll that out to many more of our same day facilities, that that will lead to more of our customers buying perishables from us.”