Amazon Halts All New Amazon Fresh Just Walk Out Stores

[storewanderer]

Same stories as Minneapolis in Crain's Detroit Business. Swirling the drain....

And there seems to be complete silence out of Wall Street regarding this.

After all the noise they make whenever Amazon announces something about how it is going to crush the competition...

[Romr123]

A little more detail on the situation in Detroit. Susan Selasky is a knowledgeable local reporter (does retail and food)
https://www.freep.com/story/money/busin ... 212969007/

[ClownLoach]

And...let the lawsuits commence!

https://www.bizjournals.com/philadelphi ... grove.html

By Ryan Mulligan – Reporter, Philadelphia Business Journal
May 12, 2023
.....
The complaint alleges that Amazon is "intentionally withholding rent under the false premise that landlord is in default of its lease obligations" and "has intentionally refused to complete its work, commence operations or pay rent, despite no interference by landlord.” Federal Realty says that it relocated other tenants within the shopping center for the "sole benefit" of Amazon, including Barnes & Noble, which the grocery store would replace. The suit alleges that Amazon has "unilaterally ceased all efforts" to complete its fit-out work and commence operations, constituting a default on the lease, while Federal Realty has fulfilled all of its obligations.

Amazon signed a 31,133-square-foot lease at the shopping center off Park Avenue in Montgomery County around April 2020, according to court filings. Rent, along with other expenses, totaled over $71,000 per month, the suit shows. Federal Realty, represented by Philadelphia law firm Zarwin Baum DeVito Kaplan Schaer Toddy, is seeking reimbursement of almost $180,000 in unpaid rent and expenses.

In its response filed Monday, Amazon denies the claims. The e-commerce giant, which is is being represented in the case by Greenberg Traurig, said the complaint "incorrectly represented the content" of the October 2022 conference call during which Federal Realty alleges Amazon disclosed the decision to halt Amazon Fresh openings.
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Amazon's response alleges that the store is unable to open for business because Federal Realty "has failed to satisfy the landlord work completion date conditions." It argues that because Federal Realty hasn't completed the necessary alterations or improvements to the building agreed upon in the lease, Amazon has no obligation to start paying rent.

So multiple landlords seem to allege that rent is not being paid. Amazon "denies the claims." I find it hard to believe the landlords, multiple landlords especially, would accuse someone of not paying rent who actually did pay rent.

Not paying rent is not the type of conduct I expect from a business that is supposedly as strong as Amazon is made out by Wall Street to be. That is more of a (insert name of bankrupt retailer here) move.

I'm sure the Amazon lawyers scrubbed every contract in detail and found something that would technically be a landlord violation such as a planter missing a sprinkler head in the parking lot or a dead petunia in a planter, then they're claiming such failure to complete by the landlord has created a lease default so they don't have to pay and can leave for free, leaving the landlord on the hook for building an oddball sized building that nobody else will want. Obviously this operation is in its final days. They have made absolutely zero attempt to make meaningful changes that would improve the business despite the promises from the CEO that they could fix the flaws in the format by the end of 2023 and deliver the best conventional grocery model in America plus deliver the same to your house. Based on what I've read in employee forums they're intentionally killing the delivery business with the $150 minimum - most flex delivery drivers and order pullers aren't needed at all anymore and they can't get more than a couple of delivery gigs in a week when they were working 7 days and 70 hours a couple years ago.

Of course it doesn't help that customers still don't know the difference between "shipping" and "delivery" whether it's Amazon or other retailers. They think a paid Prime subscription means whatever they buy gets to their home for free, when in reality it's always been a free shipping service not free delivery. If it requires a specific person or crew to deliver it direct from store to door that's a delivery. If it goes in a box that gets mechanically sorted and handled then batched with other items in a truck that's shipping. If you read reviews everyone is complaining that the $150 minimum is unacceptable because they pay for Prime therefore they should be able to order two lemons and a 2 liter Diet Pepsi for a total of $3.27 and someone should drive 12 miles to their house and carry it in for no additional charge even if it costs the store $100 in overhead costs for that order.

[BreakingThrough]

Anyone else see the puff piece in the WSJ about Amazon's grocery business? An excerpt:

Amazon has been dabbling in the grocery business for years. It launched its first grocery storefront on its website in 2006 and bought Whole Foods Market for $13.1 billion 11 years later. Soon after, Amazon began opening its own physical stores featuring innovative technology such as Just Walk Out, which senses what shoppers pick up and charges them automatically, and Dash Carts, which let shoppers scan and pay for items as they put them in their carts. The latest development: Amazon One, which allows shoppers to pay with a scan of their palm.

Despite the whiz-bang features, Amazon has barely scratched the surface. The company that now generates nearly $525 billion in annual revenue has just over a 3% share of the U.S. grocery market between its branded stores and Whole Foods, according to the latest data from Numerator. Walmart—one of only two other public companies on the planet generating more annual revenue than Amazon—has a 30% share, including Sam’s Club, while grocery giant Kroger sits at 11%.

Still, to really crack the grocery market, Amazon needs a bigger physical store footprint. Bricks-and-mortar shops still accounted for about 90% of U.S. grocery sales last year, according to estimates from UBS. And while the pandemic drove more consumers to shop for groceries online, many have returned to in-person shopping. Around 46% of respondents surveyed by UBS in 2022 said they shopped online for groceries at least once a week, down from 48% in 2020.

That explains why Mr. Bezos’ successor is looking to kick things up a notch. Last month, in his second annual letter to shareholders since taking over, Andy Jassy described the grocery business as an $800 billion market segment in the U.S. alone and wrote “we aspire to serve more of our customers’ grocery needs than we do today.” To do so, the man who led the invention of Amazon’s cloud-computing business wrote that “we need a broader physical store footprint given that most of the grocery shopping still happens in physical venues.”

Whole Foods already has more than 530 locations in North America and the U.K., while Amazon has more than 60 stores in the U.S. operating under its Fresh and Go brands. By comparison, Walmart operates around 5,300 stores in the U.S., including Sam’s Club, and Kroger operates about 2,700.

Closing that gap will be time-consuming and expensive if Amazon plans on growing organically. The real-estate market is challenging: Vacancy rates for neighborhood centers, a format applicable to most grocery stores, have been dropping over the past decade, with only a slight bump during the depths of the pandemic, according to data from commercial real-estate firm JLL. It reached 6.1% in the first quarter of this year—the lowest since 2006.

“A parcel of land in a place with residential density probably has already been developed as a grocery store,” says James Cook, JLL’s director of retail research.

An acquisition could speed things up. Scott Mushkin, Managing Partner of research firm R5 Capital, says adding a chain like Sprouts Farmers Market into the Whole Foods family would scale up the company’s presence in the fresh produce-focused, specialty grocery market. Another possibility is buying up the stores that supermarket giants Kroger and Albertsons would have to divest as part of their proposed combination. In a report last month, analysts at Bernstein estimated they will have to divest up to 550 stores, many of which “are likely in geography that would be attractive to Amazon.”

However, the regulatory environment has soured significantly on big tech companies buying their way into new segments. Even Amazon’s proposed acquisition of iRobot, the maker of the Roomba, for a price one-eighth what it spent on Whole Foods, is facing enhanced scrutiny. Bernstein’s analysts agree this is a major risk but added that Amazon still “might make more sense as a buyer than some of the alternatives.” The Kroger-Albertsons deal faces obstacles too.

And now grocery competitors are encroaching on Amazon’s digital turf. Walmart surpassed Amazon’s market share (including Whole Foods online delivery) in online grocery sales in 2020 and eMarketer expects it to keep its number one position this year and next. Soon-to-be-public Instacart also is gaining ground, having surpassed Amazon’s online grocery market share in 2021, according to eMarketer.

Don’t count Amazon out, though. The company has a long history of solving the thorny problems of getting consumers and their stuff in close proximity. It also has a new boss with a powerful motivation to rejuvenate the company’s sales growth, plus an estimated 167 million members of its Prime shipping service in the U.S. alone, according to Consumer Intelligence Research Partners, who are already inclined to concentrate their spending on the company’s offerings.

As Mr. Mushkin puts it, successful companies either enhance customers’ time, save their time or save them money. Amazon already has what it takes to save them time and money. If the e-commerce pioneer can also enhance the physical shopping experience then bagging the grocery market is possible. That will be no easy feat, but rivals shouldn’t assume the company is just going to pack it in.

Absolutely zero mention of the unopened Amazon Fresh stores that are in limbo. Very poor reporting to not even mention this and frame things as Amazon wants to expand its physical footprint even more but can't find good locations.

But prominent "what-ifs" about buying Sprouts and combining with Whole Foods, or picking up the Kroger-ABS divests.

[retailfanmitchell019]

Anyone else see the puff piece in the WSJ about Amazon's grocery business? An excerpt:
Absolutely zero mention of the unopened Amazon Fresh stores that are in limbo. Very poor reporting to not even mention this and frame things as Amazon wants to expand its physical footprint even more but can't find good locations.

But prominent "what-ifs" about buying Sprouts and combining with Whole Foods, or picking up the Kroger-ABS divests.

Unless the stores are in right-to-work states, Amazon will not be allowed to buy anything from Kroger/Albertsons.

[storewanderer]

Anyone else see the puff piece in the WSJ about Amazon's grocery business? An excerpt:
Absolutely zero mention of the unopened Amazon Fresh stores that are in limbo. Very poor reporting to not even mention this and frame things as Amazon wants to expand its physical footprint even more but can't find good locations.

But prominent "what-ifs" about buying Sprouts and combining with Whole Foods, or picking up the Kroger-ABS divests.

Unless the stores are in right-to-work states, Amazon will not be allowed to buy anything from Kroger/Albertsons.

I wonder if landlords can block the transfer of a store to Amazon also if they do not agree to them as a buyer as part of a store sale/divest/lease transfer process.

Then again Kimco (owner of Albertsons) is also the landlord of many stores so... tough to say what they may think.

[marshd1000]

Turns out that Amazon was going to open either an Amazon Fresh or Whole Foods at Renton Landing southeast of Seattle! But they backed out of the lease and are being sued!

https://www.seattletimes.com/business/p ... a-lawsuit/

[ClownLoach]

Turns out that Amazon was going to open either an Amazon Fresh or Whole Foods at Renton Landing southeast of Seattle! But they backed out of the lease and are being sued!

https://www.seattletimes.com/business/p ... a-lawsuit/

Like I said, they've recognized that if they had to make all the cash payments due to landlords to properly sever these leases they'll spend about $750M (the amount they impounded last quarter) so they're using their lawyers to find technicalities that they can claim are violations by these landlords in an effort to get out from under these deals for free. It's probably cheaper to litigate every single one and win a few, lose a few. Of course they are going to piss off every major landlord in existence and nobody will want to do business with them again... Which leads me to believe that their post-Fresh strategy will be straight up acquisitions of Entire regional grocery chains in an effort to cobble together a national chain similar to the work Kroger is trying to do. (And I don't see Sprouts as a fit, although at the rate they're declining they're not that far off from delivering Fresh level sales volumes). Amazon is convinced for some reason that they need to be a big player in the grocery market, and so far they have wasted a pretty dazzling amount of money trying to do so. They're just not good at retail. The business graveyards are full of companies like Amazon that had similar problems but thought they could spend their way to success. They're making the losses of Tesco look like a few lost pennies.

[storewanderer]

I am noticing Amazon seems to be promoting food and consumables harder and is pushing subscribe and save like crazy. I have had a few different offers this month for a wide assortment of consumables (mostly food, but also some drug/pet/cleaning stuff) in case-type sizes with a subscribe and save 40% off offer. So when you subscribe and click that coupon you get 40% off PLUS 30% off PLUS whatever the normal (usually 5%) subscribe and save discount is. Not sure if this is some kind of error or what.

I am wondering how many customers they have upset with the pushy subscribe and save program. Not to mention how they strong arm you into those "Prime Trials." They got me on one of those earlier this year, I swear I did not click to accept it, but I got it. I made it worth my while that month.

I am also seeing more and more non-returnable items.

[mbz321]

I am wondering how many customers they have upset with the pushy subscribe and save program. Not to mention how they strong arm you into those "Prime Trials." They got me on one of those earlier this year, I swear I did not click to accept it, but I got it. I made it worth my while that month.

I try to avoid shopping on Amazon, but those Prime trials certainly come in handy! (I have a couple different Amazon accounts). I just cancel right away after starting the trial so I don't get auto-billed (it will either give you a pro-rated amount if you paid a few bucks for the trial, or it will just cancel on the end date).