Amazon Fresh's cashierless plan falling short

[ClownLoach]

I think four things have gone wrong for Amazon.

First, the inflation pressures on pricing everywhere create the illusion, right or wrong, that these stores opened with low prices then jacked them through the roof later. When you are trying to change consumer habits this works against you in every way. Plus if the consumer had stopped shopping another store they didn't see the price increase there when it happened.

Second, the labor model is out of control for these stores. They're still running obscene overnight payroll with order pickers who are trying to work around freight stockers and it just isn't productive nor is the workforce available. So now they are making bad decisions, such as the sudden switch to shelf ready meats in cryovac packaging which just occurred. They had rushed to bulld the new Huntington Beach and Mission Viejo stores but both now seem to be mothballed. And the stores are understaffed during open hours leading to standards problems.

Third, they picked the wrong people overall to run this operation. They heavily recruited Target managers to operate these stores. The problem is that there are only a couple of full line grocery SuperTarget stores in SoCal and all in the Inland Empire. The Target stores near these Amazon Fresh stores are primary Pfresh stores with all prepack foods, not a traditional fresh grocery as Amazon is trying to run. This has led to bad standards in fresh produce, meats, an absolutely abysmal deli, and a hot foods bar that looked like something from Sizzler. These Target managers just walk around in packs talking to each other, completely oblivious to rotting produce that needs to be culled, disgusting hot food, and now a lack of date rotation causing spoiled items on shelves. They are clueless about how to run a fresh grocery store.

Finally they are going up against the lock downs and COVID surges, which are sales numbers that are impossible for Amazon to overcome. Online ordering and pickup services are trending downward as customers are feeling safe to shop again. These stores depended on 80% of their sales volume actually being deliveries. Amazon sales and earnings tanked today. I should have seen that coming - I noticed a couple of months ago that Amazon has suddenly made it extremely difficult to complete merchandise returns in a short sighted effort to preserve sales numbers. They used to take anything back, no question asked. My last three items, a couple cables and a car care spray all were "non returnable" according to the Amazon system despite being sold direct (not a 3rd party). All three times I had to call Amazon to get them to make an exception. One item was a very nasty car care chemical and once they finally agreed to the return they asked me to please place it in the trash - which of course is highly illegal chemical dumping. This experience, three times being forced to jump through hoops to make a return, has caused me to spend my dollars elsewhere. I've even been shopping more at Walmart despite the fact that the local stores in Orange County are horror stories.

I think that the tide is turning against Amazon right now and they need to do something to stop the bleeding, fast.

[ClownLoach]

Whole Foods here seems to be status quo except for slightly lower prices.

Don't see any deterioration yet.

I thought at first they were staying the same. Then I shopped last night and saw horrors everywhere. The cheese counter was in a shambles with hardly any product, as if they were eliminating the category. Smokehouse was mothballed. Out of stocks everywhere. And the worst - they had rearranged refrigerated produce tables to open space (due to less product). The wooden siding on the cases was exposed and covered in black and gray mold everywhere. Not a few spots - but enough to be seen 20 feet away. This was such a massive health hazard that the entire fixture should be broken down and put outside until the side panels can be replaced, and the entire produce area should be broken down and fully sanitized and disinfected urgently. This was a fixture right next to the entrance where everyone could see, and if you walked closer, smell the mold. Store that opened as a new building in 2016.

[buckguy]

I went to my local Amazon Fresh today mostly to kill a few minutes. The location is is very odd---a short walk from a good sized Whole Foods and a very high volume Trader Joe's. The store is smaller than TJs with a narrower range of merchandise. Even if it operates as an adjunct to pickup, it's a very high cost (lots of refrigeration for produce, dairy, prepared foods, beer; surprising number of staff) operation. I mention it because it was a reminder to me that Amazon is basically a software company. Their retail operations provide data and cash flow. The profits, if any, from retail are incidental. They may, yet, decide to close up the grocery stores--they've already closed at least a couple, but that operation probably wasn't was never designed to be a profit center. Its main innovation is payment systems, which could be sold to other retailers. The bright spot in their earning statement this quarter was machine learning. It's unlikely to ever be retail.

[arizonaguy]

I think four things have gone wrong for Amazon.

First, the inflation pressures on pricing everywhere create the illusion, right or wrong, that these stores opened with low prices then jacked them through the roof later. When you are trying to change consumer habits this works against you in every way. Plus if the consumer had stopped shopping another store they didn't see the price increase there when it happened.

Second, the labor model is out of control for these stores. They're still running obscene overnight payroll with order pickers who are trying to work around freight stockers and it just isn't productive nor is the workforce available. So now they are making bad decisions, such as the sudden switch to shelf ready meats in cryovac packaging which just occurred. They had rushed to bulld the new Huntington Beach and Mission Viejo stores but both now seem to be mothballed. And the stores are understaffed during open hours leading to standards problems.

Third, they picked the wrong people overall to run this operation. They heavily recruited Target managers to operate these stores. The problem is that there are only a couple of full line grocery SuperTarget stores in SoCal and all in the Inland Empire. The Target stores near these Amazon Fresh stores are primary Pfresh stores with all prepack foods, not a traditional fresh grocery as Amazon is trying to run. This has led to bad standards in fresh produce, meats, an absolutely abysmal deli, and a hot foods bar that looked like something from Sizzler. These Target managers just walk around in packs talking to each other, completely oblivious to rotting produce that needs to be culled, disgusting hot food, and now a lack of date rotation causing spoiled items on shelves. They are clueless about how to run a fresh grocery store.

Finally they are going up against the lock downs and COVID surges, which are sales numbers that are impossible for Amazon to overcome. Online ordering and pickup services are trending downward as customers are feeling safe to shop again. These stores depended on 80% of their sales volume actually being deliveries. Amazon sales and earnings tanked today. I should have seen that coming - I noticed a couple of months ago that Amazon has suddenly made it extremely difficult to complete merchandise returns in a short sighted effort to preserve sales numbers. They used to take anything back, no question asked. My last three items, a couple cables and a car care spray all were "non returnable" according to the Amazon system despite being sold direct (not a 3rd party). All three times I had to call Amazon to get them to make an exception. One item was a very nasty car care chemical and once they finally agreed to the return they asked me to please place it in the trash - which of course is highly illegal chemical dumping. This experience, three times being forced to jump through hoops to make a return, has caused me to spend my dollars elsewhere. I've even been shopping more at Walmart despite the fact that the local stores in Orange County are horror stories.

I think that the tide is turning against Amazon right now and they need to do something to stop the bleeding, fast.

Amazon's problem is that they got too big, too fast. They went from a small online bookstore to the largest online company and one of the largest corporations in the world in 20 years. It took Walmart 30 years to be something resembling what it is today (and 40 years to really become a dominant grocery player). Amazon just isn't built to handle being such a massive operation. Not to mention while Amazon is having growing pains the competition (Target, Walmart, other retailers) are really catching up in the online space. Other online retailers are great too. Chewy.com absolutely blows every other website out of the water in terms of customer service.

[HCal]

I think four things have gone wrong for Amazon.

First, the inflation pressures on pricing everywhere create the illusion, right or wrong, that these stores opened with low prices then jacked them through the roof later. When you are trying to change consumer habits this works against you in every way. Plus if the consumer had stopped shopping another store they didn't see the price increase there when it happened.

Second, the labor model is out of control for these stores. They're still running obscene overnight payroll with order pickers who are trying to work around freight stockers and it just isn't productive nor is the workforce available. So now they are making bad decisions, such as the sudden switch to shelf ready meats in cryovac packaging which just occurred. They had rushed to bulld the new Huntington Beach and Mission Viejo stores but both now seem to be mothballed. And the stores are understaffed during open hours leading to standards problems.

Third, they picked the wrong people overall to run this operation. They heavily recruited Target managers to operate these stores. The problem is that there are only a couple of full line grocery SuperTarget stores in SoCal and all in the Inland Empire. The Target stores near these Amazon Fresh stores are primary Pfresh stores with all prepack foods, not a traditional fresh grocery as Amazon is trying to run. This has led to bad standards in fresh produce, meats, an absolutely abysmal deli, and a hot foods bar that looked like something from Sizzler. These Target managers just walk around in packs talking to each other, completely oblivious to rotting produce that needs to be culled, disgusting hot food, and now a lack of date rotation causing spoiled items on shelves. They are clueless about how to run a fresh grocery store.

Finally they are going up against the lock downs and COVID surges, which are sales numbers that are impossible for Amazon to overcome. Online ordering and pickup services are trending downward as customers are feeling safe to shop again. These stores depended on 80% of their sales volume actually being deliveries. Amazon sales and earnings tanked today. I should have seen that coming - I noticed a couple of months ago that Amazon has suddenly made it extremely difficult to complete merchandise returns in a short sighted effort to preserve sales numbers. They used to take anything back, no question asked. My last three items, a couple cables and a car care spray all were "non returnable" according to the Amazon system despite being sold direct (not a 3rd party). All three times I had to call Amazon to get them to make an exception. One item was a very nasty car care chemical and once they finally agreed to the return they asked me to please place it in the trash - which of course is highly illegal chemical dumping. This experience, three times being forced to jump through hoops to make a return, has caused me to spend my dollars elsewhere. I've even been shopping more at Walmart despite the fact that the local stores in Orange County are horror stories.

I think that the tide is turning against Amazon right now and they need to do something to stop the bleeding, fast.

This is retailwatchers, so obviously we think from a retail perspective, but Amazon is a tech company first and a retailer second. I don't think they really care about running quality supermarkets. The chain of Amazon Fresh stores is a rounding error on their balance sheet.

I think the point of these stores is to develop technology. Their goal is to perfect the smart carts and the "just walk out" system. Once they do that, they can monetize them, either in their own stores or by licensing it to other retailers. In the mean time, they can easily absorb the loss that the stores incur. Worrying about the quality of the deli and produce isn't worth the hassle for them.

[ClownLoach]

I think four things have gone wrong for Amazon.

First, the inflation pressures on pricing everywhere create the illusion, right or wrong, that these stores opened with low prices then jacked them through the roof later. When you are trying to change consumer habits this works against you in every way. Plus if the consumer had stopped shopping another store they didn't see the price increase there when it happened.

Second, the labor model is out of control for these stores. They're still running obscene overnight payroll with order pickers who are trying to work around freight stockers and it just isn't productive nor is the workforce available. So now they are making bad decisions, such as the sudden switch to shelf ready meats in cryovac packaging which just occurred. They had rushed to bulld the new Huntington Beach and Mission Viejo stores but both now seem to be mothballed. And the stores are understaffed during open hours leading to standards problems.

Third, they picked the wrong people overall to run this operation. They heavily recruited Target managers to operate these stores. The problem is that there are only a couple of full line grocery SuperTarget stores in SoCal and all in the Inland Empire. The Target stores near these Amazon Fresh stores are primary Pfresh stores with all prepack foods, not a traditional fresh grocery as Amazon is trying to run. This has led to bad standards in fresh produce, meats, an absolutely abysmal deli, and a hot foods bar that looked like something from Sizzler. These Target managers just walk around in packs talking to each other, completely oblivious to rotting produce that needs to be culled, disgusting hot food, and now a lack of date rotation causing spoiled items on shelves. They are clueless about how to run a fresh grocery store.

Finally they are going up against the lock downs and COVID surges, which are sales numbers that are impossible for Amazon to overcome. Online ordering and pickup services are trending downward as customers are feeling safe to shop again. These stores depended on 80% of their sales volume actually being deliveries. Amazon sales and earnings tanked today. I should have seen that coming - I noticed a couple of months ago that Amazon has suddenly made it extremely difficult to complete merchandise returns in a short sighted effort to preserve sales numbers. They used to take anything back, no question asked. My last three items, a couple cables and a car care spray all were "non returnable" according to the Amazon system despite being sold direct (not a 3rd party). All three times I had to call Amazon to get them to make an exception. One item was a very nasty car care chemical and once they finally agreed to the return they asked me to please place it in the trash - which of course is highly illegal chemical dumping. This experience, three times being forced to jump through hoops to make a return, has caused me to spend my dollars elsewhere. I've even been shopping more at Walmart despite the fact that the local stores in Orange County are horror stories.

I think that the tide is turning against Amazon right now and they need to do something to stop the bleeding, fast.

This is retailwatchers, so obviously we think from a retail perspective, but Amazon is a tech company first and a retailer second. I don't think they really care about running quality supermarkets. The chain of Amazon Fresh stores is a rounding error on their balance sheet.

I think the point of these stores is to develop technology. Their goal is to perfect the smart carts and the "just walk out" system. Once they do that, they can monetize them, either in their own stores or by licensing it to other retailers. In the mean time, they can easily absorb the loss that the stores incur. Worrying about the quality of the deli and produce isn't worth the hassle for them.

They do not need a large chain of stores across various states to develop or test any more technology. When they were in technical development mode years ago they opened a couple of stores within walking distance, or even downstairs from their corporate offices. The fact is the technology was done years ago and is fully scalable and could be licensed today. Cost is the only thing they can still learn about - how to get the cost of thousands of cameras and sensors down while there is a microprocessor shortage - good luck fixing that issue in a lowly grocery store. The rest of the retail learnings were already in house with Whole Foods.

The chain of Fresh stores was intended to be a growth vehicle to enable faster delivery of mainstream grocery items to customers, which would help them rapidly expand this business to become the market leader in grocery deliveries. This would appeal to more customers than Whole Foods.

The Amazon model prior to fresh was similar to Walmart - build warehouse and transportation facilities in the cheapest possible way - by building in remote and rural areas. In Southern California where they have more facilities than anywhere else in the world - this meant massive warehouse after warehouse in Riverside and San Bernardino counties. They have mile long warehouses now where they built every inch of land between two freeway off ramps. The problem is that they went to their own delivery system but traffic is so bad that they couldn't deliver efficiently in the more populated LA and OC markets. Their delivery vans alone driving from the DC to LA would be enough to completely halt the 10 and 91 freeways. To solve they have two solutions. First is the delivery hub which you see popping up in smaller 50K to 100K Sq ft boxes. For non foods they now can warehouse and package out in the DCs then transport to the delivery facilities in semi trucks overnight for loading to delivery vans close to the customer. Each delivery hub facility serves maybe half a dozen cities. For foods the solution is the Fresh store - they would pick the food order at the store and can deliver sometimes within 60 minutes of the order being placed. The belief was that even though retail space was much more expensive per square foot - the walk in sales profits would offset that additional cost - and Amazon would gain even more share.

The problem is that the stores are being mismanaged - so the fresh grocery quality is abysmal now. The rotting produce and spoiled meat shows up at your house and you're never going to order from them again - or walk into their grocery store. The merchandising is terrible now - every endcap looks like a random assortment of whatever was lying around the stock room. If there are five shelves there are five unrelated items and most are not even on sale. Who makes an endcap of cookies, trash bags, salad dressing, cherry coke and some kind of tequila? This was actually an endcap today near the produce dept. and none of the items were on sale. If this was any other retailer and the DM walked in and saw this pathetic attempt at merchandising the Store Manager would be fired before the end of the visit. Even the most amateur retail manager knows that endcaps must make a statement and can be a quarter of the stores sales or more. These stores were busy when they opened - and were employing 300+ people most of whom were overnight or delivery. Now they deliver garbage, there is no availability for same day local deliveries because they have no staffing, prices are high and store experience is awful. It was a fast decline. I'm not sure where they go from here because they are running the brand into the ground. Clearly this last couple of quarters has been very bad for Amazon.

[Romr123]

Interesting. We stayed at our condo in Palm Springs last winter, and were surprised that all Amazon orders arrived UPS. We're back out for the month and are seeing some Amazon trucks around. Lo and behold saw a newly opened Delivery Center in Cathedral City on Date Palm--it may have been a Smith's in a prior life...the box had been empty for a long time.

[buckguy]

Amazon is a software company---the retail feeds data and cash. They don't have to function as a normal retailer and can fail at it. The book stores don't seem very successful. They were not the first online retailer or even the first online bookseller---there used to be a book seller based in Cleveland that pioneered online only but they didn't have the capital or software to adapt and grow with the web. Among other things, Amazon was always a software business and they figured out how to do online retail with minimal human activity and they're trying to do it with brick and mortar platforms. They lost money for years but were a Wall Street darling. They are now big enough that they can lose money on some things, as long as their most profitable business (software) is thriving.

Walmart is analogous in the sense that they are basically a logistics company that uses stores to push out merchandise. They got there in a different way than Amazon, starting as a conventional retailer that was anti-labor and driven to increase efficiencies from a normal way of doing business. Walmart is pretty rigid and that kept them from really exploiting the web until surprisingly late. Ultimately, their ham fisted approach to merchandise (though shalt buy only one size of pickles) and their need to squeeze more profits out of a lean model of operations has put them in an awkward position of having few options for growth and a horrible image among many shoppers.

No one really needs to shop at either place on a regular basis. I use Amazon mostly for downloads and things I truly can't find elsewhere and I was a very early adopter of them. I only go to Walmart out of the same kind of necessity or out of curiosity to see how they're functioning. I went to Amazon Fresh to kill time waiting for a pizza across the street. I'm not missing much with either. Neither is the bargain they once were and they both are predatory businesses with too much power and distorting effects on the marketplace. OTOH, markets are always distorted and looking for who/how is more useful than acting as though markets are organisms we can't stop.

[veteran+]

Whole Foods here seems to be status quo except for slightly lower prices.

Don't see any deterioration yet.

I thought at first they were staying the same. Then I shopped last night and saw horrors everywhere. The cheese counter was in a shambles with hardly any product, as if they were eliminating the category. Smokehouse was mothballed. Out of stocks everywhere. And the worst - they had rearranged refrigerated produce tables to open space (due to less product). The wooden siding on the cases was exposed and covered in black and gray mold everywhere. Not a few spots - but enough to be seen 20 feet away. This was such a massive health hazard that the entire fixture should be broken down and put outside until the side panels can be replaced, and the entire produce area should be broken down and fully sanitized and disinfected urgently. This was a fixture right next to the entrance where everyone could see, and if you walked closer, smell the mold. Store that opened as a new building in 2016.

May I ask what city and State that happened?

Side note: I found horrific out of stocks at Trader Joes in West Hollywood and several quality issues way above the norm. Won't be going back there for a long while.

[ClownLoach]

Whole Foods here seems to be status quo except for slightly lower prices.

Don't see any deterioration yet.

I thought at first they were staying the same. Then I shopped last night and saw horrors everywhere. The cheese counter was in a shambles with hardly any product, as if they were eliminating the category. Smokehouse was mothballed. Out of stocks everywhere. And the worst - they had rearranged refrigerated produce tables to open space (due to less product). The wooden siding on the cases was exposed and covered in black and gray mold everywhere. Not a few spots - but enough to be seen 20 feet away. This was such a massive health hazard that the entire fixture should be broken down and put outside until the side panels can be replaced, and the entire produce area should be broken down and fully sanitized and disinfected urgently. This was a fixture right next to the entrance where everyone could see, and if you walked closer, smell the mold. Store that opened as a new building in 2016.

May I ask what city and State that happened?

Side note: I found horrific out of stocks at Trader Joes in West Hollywood and several quality issues way above the norm. Won't be going back there for a long while.

Irvine CA