Amazon Fresh's cashierless plan falling short

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Re: Amazon Fresh's cashierless plan falling short

Post by ClownLoach »

buckguy wrote: October 30th, 2021, 6:03 am 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.
To discount Amazon as something less than a major retailer is not reality as their retail sales are astronomical. It took a long time to get there, to be fair, but in the last five years they really exploded in sales volume as they scaled everything upward. Target Corporation does approx. $77B a year in total sales. Amazon's revenue is split almost 50/50 between retail and cloud computing, but their retail is massive. This last quarter Amazon brought in $92B in revenue. Half was AWS (Cloud Computing and other business services). So you're talking about over $45B in retail sales directly sold by Amazon - plus whatever was sold by third parties. Their retail sales for the 90 day quarter - in what was by all accounts a terrible underperformance - was 58% of what Target brings in over an entire year with their 2000+ store count.

The challenge Amazon is facing is that they're reinvesting all of that retail profit into capital expenditures - new store builds for Fresh, new delivery hubs, new distribution centers, and more airplanes. So retail becomes a breakeven enterprise by design. At this time the only profit is coming from AWS which is Cloud services. It takes a lot of data centers which are expensive to equip and operate to bring in that revenue, so it is not as profitable as you might expect.

So if Amazon retail misses sales plan, which it did this last quarter, then it leaves them in a rough place because the projected profits are already spent and there is little the data business can do to offset. Hence the strange accounting activities such as taking a building in Huntington Beach, CA - rushing construction 24/7 to get it done early - then mothballing it at the end of the project in an attempt to roll the capital expense into a later quarter.

A company doing $45B in direct retail sales either online or in stores is a massive, massive retailer. The only retailers larger at this point are Walmart, Home Depot, and Costco.
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Re: Amazon Fresh's cashierless plan falling short

Post by pseudo3d »

ClownLoach wrote: October 30th, 2021, 10:24 am
buckguy wrote: October 30th, 2021, 6:03 am 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.
To discount Amazon as something less than a major retailer is not reality as their retail sales are astronomical. It took a long time to get there, to be fair, but in the last five years they really exploded in sales volume as they scaled everything upward. Target Corporation does approx. $77B a year in total sales. Amazon's revenue is split almost 50/50 between retail and cloud computing, but their retail is massive. This last quarter Amazon brought in $92B in revenue. Half was AWS (Cloud Computing and other business services). So you're talking about over $45B in retail sales directly sold by Amazon - plus whatever was sold by third parties. Their retail sales for the 90 day quarter - in what was by all accounts a terrible underperformance - was 58% of what Target brings in over an entire year with their 2000+ store count.

The challenge Amazon is facing is that they're reinvesting all of that retail profit into capital expenditures - new store builds for Fresh, new delivery hubs, new distribution centers, and more airplanes. So retail becomes a breakeven enterprise by design. At this time the only profit is coming from AWS which is Cloud services. It takes a lot of data centers which are expensive to equip and operate to bring in that revenue, so it is not as profitable as you might expect.

So if Amazon retail misses sales plan, which it did this last quarter, then it leaves them in a rough place because the projected profits are already spent and there is little the data business can do to offset. Hence the strange accounting activities such as taking a building in Huntington Beach, CA - rushing construction 24/7 to get it done early - then mothballing it at the end of the project in an attempt to roll the capital expense into a later quarter.

A company doing $45B in direct retail sales either online or in stores is a massive, massive retailer. The only retailers larger at this point are Walmart, Home Depot, and Costco.
Comparing Walmart to Amazon brings up another interesting point. One thing to keep in mind is that the fates of brick & mortar and the online storefront is tied together. An online storefront never really has saved a B&M retailer from obsolescence in the long run, and bad store experiences often translates to a bad online experience. I truly believe that Walmart's reputation of how it keeps its stores in all of the way that matter is why it tends to struggle with new online ventures.

In the case of Amazon, keeping a small chain of lousy, break-even grocery stores may not hurt the balance sheet overall, it will start affecting the other side of the business as well, especially as these stores share the name of their main enterprise.

Like with Fresh & Easy, Amazon invested in areas that have very competitive markets with a lackluster product, it's too late to start over with markets that only have lackluster Albertsons and/or Kroger based markets to start working off of. The question is if Amazon will let the stores slowly harm the main enterprise indefinitely, sink more money into the project to keep them afloat, or swallow their pride and cut them loose?

Dismantling Amazon Fresh would rock the stock market and signal that Amazon is not invincible, but will probably be healthier for Amazon in the long run.
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Re: Amazon Fresh's cashierless plan falling short

Post by ClownLoach »

pseudo3d wrote: October 31st, 2021, 1:51 pm
ClownLoach wrote: October 30th, 2021, 10:24 am
buckguy wrote: October 30th, 2021, 6:03 am 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.
To discount Amazon as something less than a major retailer is not reality as their retail sales are astronomical. It took a long time to get there, to be fair, but in the last five years they really exploded in sales volume as they scaled everything upward. Target Corporation does approx. $77B a year in total sales. Amazon's revenue is split almost 50/50 between retail and cloud computing, but their retail is massive. This last quarter Amazon brought in $92B in revenue. Half was AWS (Cloud Computing and other business services). So you're talking about over $45B in retail sales directly sold by Amazon - plus whatever was sold by third parties. Their retail sales for the 90 day quarter - in what was by all accounts a terrible underperformance - was 58% of what Target brings in over an entire year with their 2000+ store count.

The challenge Amazon is facing is that they're reinvesting all of that retail profit into capital expenditures - new store builds for Fresh, new delivery hubs, new distribution centers, and more airplanes. So retail becomes a breakeven enterprise by design. At this time the only profit is coming from AWS which is Cloud services. It takes a lot of data centers which are expensive to equip and operate to bring in that revenue, so it is not as profitable as you might expect.

So if Amazon retail misses sales plan, which it did this last quarter, then it leaves them in a rough place because the projected profits are already spent and there is little the data business can do to offset. Hence the strange accounting activities such as taking a building in Huntington Beach, CA - rushing construction 24/7 to get it done early - then mothballing it at the end of the project in an attempt to roll the capital expense into a later quarter.

A company doing $45B in direct retail sales either online or in stores is a massive, massive retailer. The only retailers larger at this point are Walmart, Home Depot, and Costco.
Comparing Walmart to Amazon brings up another interesting point. One thing to keep in mind is that the fates of brick & mortar and the online storefront is tied together. An online storefront never really has saved a B&M retailer from obsolescence in the long run, and bad store experiences often translates to a bad online experience. I truly believe that Walmart's reputation of how it keeps its stores in all of the way that matter is why it tends to struggle with new online ventures.

In the case of Amazon, keeping a small chain of lousy, break-even grocery stores may not hurt the balance sheet overall, it will start affecting the other side of the business as well, especially as these stores share the name of their main enterprise.

Like with Fresh & Easy, Amazon invested in areas that have very competitive markets with a lackluster product, it's too late to start over with markets that only have lackluster Albertsons and/or Kroger based markets to start working off of. The question is if Amazon will let the stores slowly harm the main enterprise indefinitely, sink more money into the project to keep them afloat, or swallow their pride and cut them loose?

Dismantling Amazon Fresh would rock the stock market and signal that Amazon is not invincible, but will probably be healthier for Amazon in the long run.
I'm actually thinking Amazon should take the Fresh stores to online only until they can figure this out. When they first opened the stores they deliberately ran them dark - even with painted black windows - for months to try to learn the local market and adjust the assortment. This enabled 24/7 operations without customers in the way. The foods that were delivered were fresh, deliveries were lightning fast, prices were great and the experience was without any question the best online grocery experience the industry has ever seen.

Then they opened the doors to the public and the operation broke under the wrong leadership and operating model. They had to shift stocking and the majority of order picking to overnight because at times the stores were at capacity with a 2 to 1 ratio of Amazon order pickers to walk in customers. Standards started to decline and frustration for the customer as well as the employee set in - the customer became an obstacle in the way of the ruthless productivity standards Amazon demands of their employees. This also burned off new customers who were aggravated with waiting in a line because they were seen as less important than the Amazon employees. Meanwhile Amazon burnt through hundreds of employees right at the beginning of the "Great Resignation" labor crisis so their stores suddenly do not have enough employees to operate. The loss of employees led to a drastic reduction in the available delivery windows, eliminating the competitive delivery advantage of being able to order practically anything and it would be on your doorstep in one hour for a $4.99 to $6.99 up charge, or no additional charge in 2 hours for a Prime member. Clearly their aggressive, pardon the pun, targeting of Target managers to run the majority of these stores was a huge bust. And if the rest of them were from Amazon warehouses then it would explain why product looks like it is "slotted" in a storage rack instead of merchandised on a display (the endcaps of completely random product that defies all logic) as a warehouse deliberately stores like product in very different locations to prevent mis-picks.

What Amazon should do is play a bit of let's pretend and see if it sticks on Wall Street. Announce that the Amazon Fresh stores are going dark to retail customers due to unprecedented demand for delivery and curbside pickup services. This would be similar to the various Whole Foods stores that were also taken dark in NYC and elsewhere during the pandemic. Taking the retail customer out of the building will allow them to fix the management and training problems without the customer seeing the problem. If the store needs remerchandising, remodeling or reconfiguration to better operate this would allow for that too. This will allow them to figure out better ways to manage stocking a store, merchandising it to appeal to customers with high standards, and operating it for thousands of daily deliveries/pickups. They might even be able to generate more sales temporarily by this announcement as it excites customers to make their orders early for the holidays out of fear a delivery window won't be open due to all of this "demand."

Once the stores are fixed from an operating model, training, staffing and leadership model they can relaunch the new and improved Amazon Fresh. They avoid looking bad to the public and Wall Street doesn't panic. I guarantee that even though we all agree the grocery stores are not a significant part of the overall business - they definitely constitute tens of billions or more in the overly inflated Amazon stock value - and their poor operations put the entire Amazon brand at risk. Amazon cannot afford for Fresh to fail because the goodwill attached to the concept is built into their asset value and stock price. The cost of closing this business which likely generates less than $100M annually could potentially be a write off of billions of dollars due to the goodwill and R&D expense. They can't close the stores permanently. Amazon is actually too big to fail these days. The presence of Amazon stock in so many 401k mutual funds, public retirement plans etc. means that the failure of these handful of grocery stores actually could be what it takes to start a national recession - as their permanent closure could lop hundreds of billions of dollars off Amazon's ridiculous stock value.

We have seen Amazon take brutal actions when necessary to save face with the public - after review and rating scandals recently they banned some of their top selling brands such as Aukey cables - it was better to protect the integrity of Amazon's image than keep selling products from shady vendors. They need to take the same approach to fix the grocery stores - take them online only - fix the problems - have a national Grand Reopening when they're finally ready to go - and then they will project well and become the growth vehicle Amazon expects.

Or they could just go buy Target as I have speculated many times, and let them turn the Fresh stores into the small format Targets. Considering that Target is now such a minuscule retailer compared to Amazon - this may be a great idea that could also allow them to separate the cloud computing/software business AWS from the retail business - as both would be heavily profitable on a standalone basis.
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Re: Amazon Fresh's cashierless plan falling short

Post by HCal »

pseudo3d wrote: October 31st, 2021, 1:51 pm
In the case of Amazon, keeping a small chain of lousy, break-even grocery stores may not hurt the balance sheet overall, it will start affecting the other side of the business as well, especially as these stores share the name of their main enterprise.

Like with Fresh & Easy, Amazon invested in areas that have very competitive markets with a lackluster product, it's too late to start over with markets that only have lackluster Albertsons and/or Kroger based markets to start working off of. The question is if Amazon will let the stores slowly harm the main enterprise indefinitely, sink more money into the project to keep them afloat, or swallow their pride and cut them loose?

Dismantling Amazon Fresh would rock the stock market and signal that Amazon is not invincible, but will probably be healthier for Amazon in the long run.
I don't think this is a two-way street. For Walmart, the physical retail side is much larger, older, and better known than the online side, so its reputation impacts the public's perception of the website. For Amazon, the situation is reversed, so the reputation of the website rubs off on the physical stores, but the reverse impact would be minimal. I don't think anyone is going to decide to use eBay instead of Amazon to order diapers because the Amazon Fresh store had rotting produce.
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Re: Amazon Fresh's cashierless plan falling short

Post by HCal »

ClownLoach wrote: October 31st, 2021, 6:47 pm Amazon cannot afford for Fresh to fail because the goodwill attached to the concept is built into their asset value and stock price. The cost of closing this business which likely generates less than $100M annually could potentially be a write off of billions of dollars due to the goodwill and R&D expense. They can't close the stores permanently. Amazon is actually too big to fail these days. The presence of Amazon stock in so many 401k mutual funds, public retirement plans etc. means that the failure of these handful of grocery stores actually could be what it takes to start a national recession - as their permanent closure could lop hundreds of billions of dollars off Amazon's ridiculous stock value.
Amazon has had plenty of failures before. Fire Phone, Amazon Wallet, some sort of Groupon-like service, etc. This is normal for tech companies. Remember Google+?

If Amazon were to shut down the Amazon Fresh stores, I doubt too many people would notice, other than us retail nerds. Wall Street might respond by downgrading them, but that would probably be temporary and they would recover quite quickly. The best way to do it would probably be to announce that the stores are being merged into Whole Foods, and then turn a few of them into Whole Foods while quietly shutting down the rest.
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Re: Amazon Fresh's cashierless plan falling short

Post by ClownLoach »

HCal wrote: October 31st, 2021, 9:21 pm
ClownLoach wrote: October 31st, 2021, 6:47 pm Amazon cannot afford for Fresh to fail because the goodwill attached to the concept is built into their asset value and stock price. The cost of closing this business which likely generates less than $100M annually could potentially be a write off of billions of dollars due to the goodwill and R&D expense. They can't close the stores permanently. Amazon is actually too big to fail these days. The presence of Amazon stock in so many 401k mutual funds, public retirement plans etc. means that the failure of these handful of grocery stores actually could be what it takes to start a national recession - as their permanent closure could lop hundreds of billions of dollars off Amazon's ridiculous stock value.
Amazon has had plenty of failures before. Fire Phone, Amazon Wallet, some sort of Groupon-like service, etc. This is normal for tech companies. Remember Google+?

If Amazon were to shut down the Amazon Fresh stores, I doubt too many people would notice, other than us retail nerds. Wall Street might respond by downgrading them, but that would probably be temporary and they would recover quite quickly. The best way to do it would probably be to announce that the stores are being merged into Whole Foods, and then turn a few of them into Whole Foods while quietly shutting down the rest.
I think Wall Street has bet too much on this horse though. They've been convinced that just through the velocity generated by the sheer mass of Amazon that they will steamroller the conventional grocery industry, leaving Kroger and ABS amongst others in ashes. This is the most forward facing Amazon branded customer experience yet - instead of a few obscure bookstores that have morphed into visionless gadget shacks (there seems to be little left of the bookstores and I think they will fold into the 4 Star store format very soon) - this is a neighborhood supermarket. Yes we all know Amazon owns Whole Foods but a surprisingly large group of people still are surprised by it - I just saw a cashier trying to explain why she needed an Amazon Prime account for a sale to a customer who thought Whole Foods was somehow trying to steal her Amazon account information!

This is a big box with a giant Amazon sign on it. It sets a brand experience that is far below the typical frictionless Amazon experience. Nothing is easy about shopping at Amazon Fresh. Nothing lives to the expiration date, or even close, if it's purchased on their store. As social media seems to train people to "ghost" businesses that give them a bad experience - the risk of a customer stopping their Amazon.com orders due to a bad Fresh experience grows daily. Today's consumer has become polarized and less tolerant of brands that give them a negative experience in any way. Fresh has shifted from a business that shows you the amazing capabilities of Amazon (want seventeen lemons, two on the vine tomatoes, and a couple of fresh steaks in 60 minutes from order? They can do it) to a seeming afterthought. But the shareholders haven't forgotten.

The pricing of Amazon stock is assuming that Fresh becomes a 2500+ store juggernaut that leapfrogs to the top, leaving only Walmart with more share of groceries. It's baked in, just like lower amounts are baked into the Kroger stock value and the disappointing ABS IPO.

Amazon stock is almost like its own form of cryptocurrency these days. They're too big now. Ten years ago failures like their Fire phone would wipe several million off their market cap, no big deal. But now everything they do causes stock swings that either create or erase tens to hundreds of billions in stockholders equity.

This is why even though I think they are now floundering on Fresh they will happily spend a fortune to fix it. Even if it means closing every box, gutting the interiors and starting again from scratch as we saw Fresh and Easy do a few times in their final days.

With the stock of Amazon having so much of a basis on 401K plans, pension plans, etc. again the risk to the economy is massive if something really tips the boat with Amazon.
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Re: Amazon Fresh's cashierless plan falling short

Post by storewanderer »

ClownLoach wrote: October 31st, 2021, 10:49 pm
This is why even though I think they are now floundering on Fresh they will happily spend a fortune to fix it. Even if it means closing every box, gutting the interiors and starting again from scratch as we saw Fresh and Easy do a few times in their final days.

With the stock of Amazon having so much of a basis on 401K plans, pension plans, etc. again the risk to the economy is massive if something really tips the boat with Amazon.
Or Amazon will buy some other grocer...

But do they want the rural locations and unionized workforce?

Also your comment about Target Managers hired by Amazon who do nothing but walk around the store in groups talking all day... I guess that is common? I have observed a lot of that at the Reno Target over the years, especially the past year or two. Other Target Stores I go into, I don't know who is in charge at all.

Also why would Amazon hire Target managers to run grocery stores and not move people over from Whole Foods? Target's weakness and underperformance in grocery is well documented.
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Re: Amazon Fresh's cashierless plan falling short

Post by pseudo3d »

ClownLoach wrote: October 31st, 2021, 6:47 pm
pseudo3d wrote: October 31st, 2021, 1:51 pm
ClownLoach wrote: October 30th, 2021, 10:24 am

To discount Amazon as something less than a major retailer is not reality as their retail sales are astronomical. It took a long time to get there, to be fair, but in the last five years they really exploded in sales volume as they scaled everything upward. Target Corporation does approx. $77B a year in total sales. Amazon's revenue is split almost 50/50 between retail and cloud computing, but their retail is massive. This last quarter Amazon brought in $92B in revenue. Half was AWS (Cloud Computing and other business services). So you're talking about over $45B in retail sales directly sold by Amazon - plus whatever was sold by third parties. Their retail sales for the 90 day quarter - in what was by all accounts a terrible underperformance - was 58% of what Target brings in over an entire year with their 2000+ store count.

The challenge Amazon is facing is that they're reinvesting all of that retail profit into capital expenditures - new store builds for Fresh, new delivery hubs, new distribution centers, and more airplanes. So retail becomes a breakeven enterprise by design. At this time the only profit is coming from AWS which is Cloud services. It takes a lot of data centers which are expensive to equip and operate to bring in that revenue, so it is not as profitable as you might expect.

So if Amazon retail misses sales plan, which it did this last quarter, then it leaves them in a rough place because the projected profits are already spent and there is little the data business can do to offset. Hence the strange accounting activities such as taking a building in Huntington Beach, CA - rushing construction 24/7 to get it done early - then mothballing it at the end of the project in an attempt to roll the capital expense into a later quarter.

A company doing $45B in direct retail sales either online or in stores is a massive, massive retailer. The only retailers larger at this point are Walmart, Home Depot, and Costco.
Comparing Walmart to Amazon brings up another interesting point. One thing to keep in mind is that the fates of brick & mortar and the online storefront is tied together. An online storefront never really has saved a B&M retailer from obsolescence in the long run, and bad store experiences often translates to a bad online experience. I truly believe that Walmart's reputation of how it keeps its stores in all of the way that matter is why it tends to struggle with new online ventures.

In the case of Amazon, keeping a small chain of lousy, break-even grocery stores may not hurt the balance sheet overall, it will start affecting the other side of the business as well, especially as these stores share the name of their main enterprise.

Like with Fresh & Easy, Amazon invested in areas that have very competitive markets with a lackluster product, it's too late to start over with markets that only have lackluster Albertsons and/or Kroger based markets to start working off of. The question is if Amazon will let the stores slowly harm the main enterprise indefinitely, sink more money into the project to keep them afloat, or swallow their pride and cut them loose?

Dismantling Amazon Fresh would rock the stock market and signal that Amazon is not invincible, but will probably be healthier for Amazon in the long run.
I'm actually thinking Amazon should take the Fresh stores to online only until they can figure this out. When they first opened the stores they deliberately ran them dark - even with painted black windows - for months to try to learn the local market and adjust the assortment. This enabled 24/7 operations without customers in the way. The foods that were delivered were fresh, deliveries were lightning fast, prices were great and the experience was without any question the best online grocery experience the industry has ever seen.

Then they opened the doors to the public and the operation broke under the wrong leadership and operating model. They had to shift stocking and the majority of order picking to overnight because at times the stores were at capacity with a 2 to 1 ratio of Amazon order pickers to walk in customers. Standards started to decline and frustration for the customer as well as the employee set in - the customer became an obstacle in the way of the ruthless productivity standards Amazon demands of their employees. This also burned off new customers who were aggravated with waiting in a line because they were seen as less important than the Amazon employees. Meanwhile Amazon burnt through hundreds of employees right at the beginning of the "Great Resignation" labor crisis so their stores suddenly do not have enough employees to operate. The loss of employees led to a drastic reduction in the available delivery windows, eliminating the competitive delivery advantage of being able to order practically anything and it would be on your doorstep in one hour for a $4.99 to $6.99 up charge, or no additional charge in 2 hours for a Prime member. Clearly their aggressive, pardon the pun, targeting of Target managers to run the majority of these stores was a huge bust. And if the rest of them were from Amazon warehouses then it would explain why product looks like it is "slotted" in a storage rack instead of merchandised on a display (the endcaps of completely random product that defies all logic) as a warehouse deliberately stores like product in very different locations to prevent mis-picks.

What Amazon should do is play a bit of let's pretend and see if it sticks on Wall Street. Announce that the Amazon Fresh stores are going dark to retail customers due to unprecedented demand for delivery and curbside pickup services. This would be similar to the various Whole Foods stores that were also taken dark in NYC and elsewhere during the pandemic. Taking the retail customer out of the building will allow them to fix the management and training problems without the customer seeing the problem. If the store needs remerchandising, remodeling or reconfiguration to better operate this would allow for that too. This will allow them to figure out better ways to manage stocking a store, merchandising it to appeal to customers with high standards, and operating it for thousands of daily deliveries/pickups. They might even be able to generate more sales temporarily by this announcement as it excites customers to make their orders early for the holidays out of fear a delivery window won't be open due to all of this "demand."

Once the stores are fixed from an operating model, training, staffing and leadership model they can relaunch the new and improved Amazon Fresh. They avoid looking bad to the public and Wall Street doesn't panic. I guarantee that even though we all agree the grocery stores are not a significant part of the overall business - they definitely constitute tens of billions or more in the overly inflated Amazon stock value - and their poor operations put the entire Amazon brand at risk. Amazon cannot afford for Fresh to fail because the goodwill attached to the concept is built into their asset value and stock price. The cost of closing this business which likely generates less than $100M annually could potentially be a write off of billions of dollars due to the goodwill and R&D expense. They can't close the stores permanently. Amazon is actually too big to fail these days. The presence of Amazon stock in so many 401k mutual funds, public retirement plans etc. means that the failure of these handful of grocery stores actually could be what it takes to start a national recession - as their permanent closure could lop hundreds of billions of dollars off Amazon's ridiculous stock value.

We have seen Amazon take brutal actions when necessary to save face with the public - after review and rating scandals recently they banned some of their top selling brands such as Aukey cables - it was better to protect the integrity of Amazon's image than keep selling products from shady vendors. They need to take the same approach to fix the grocery stores - take them online only - fix the problems - have a national Grand Reopening when they're finally ready to go - and then they will project well and become the growth vehicle Amazon expects.

Or they could just go buy Target as I have speculated many times, and let them turn the Fresh stores into the small format Targets. Considering that Target is now such a minuscule retailer compared to Amazon - this may be a great idea that could also allow them to separate the cloud computing/software business AWS from the retail business - as both would be heavily profitable on a standalone basis.
Amazon's stock price has only risen since the start of COVID-19, going from $1,785/share to around $3,200/share, and dismantling the grocery store chain would probably more be along the lines of selling most of them than actually closing them. It might not even matter...Walmart's stock price didn't blink much when they closed over 150 stores in January 2016, including a number of Supercenter stores, some Neighborhood Markets, and all of the Walmart Express stores.

Amazon has enough finances that PR could weasel them out of any long-range trouble, they could admit it was an "experiment" and admit that they learned about consumers to improve Amazon.com as a whole. Trying to say that "too many deliveries caused us to close" is akin to fast food restaurants being temporarily closed for "remodeling" and then never actually reopening.

No one is going to lose their faith in Amazon if they decide to put the kibosh on Amazon Fresh, and it will probably recover in 24 hours or less. And if killing Amazon Fresh (even if they hold onto WFM, at least for now) is the impetus to a lower stock price, better start deflating it now slowly instead of the violent fallout when the AMZN bubble eventually pops, which WILL hurt the larger economy.
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Re: Amazon Fresh's cashierless plan falling short

Post by storewanderer »

If Amazon "kills" "Amazon Fresh" I am confident they will have another concept waiting in the wings to continue to give the impression they will dominate grocery and make Wall Street put pressure on the other grocery chains that are publicly traded and continue the narrative that Amazon is going to doom the other publicly traded grocery chains.

Amazon may also find the grocery business isn't so great- it is a great business for cash flow but it is low margin and high labor. Amazon is moving so much other better margin product and services that maybe grocery is a product line better left as a lower focus area.

I also think Amazon is having a major impact on the labor force that would typically be taking retail/restaurant jobs at the present time by paying a bit more and with the flex scheduling, etc. models. If Amazon bleeds the labor out of these grocery competitors then they could win the grocery business by default and on their terms.
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Re: Amazon Fresh's cashierless plan falling short

Post by ClownLoach »

storewanderer wrote: October 31st, 2021, 11:28 pm
I also think Amazon is having a major impact on the labor force that would typically be taking retail/restaurant jobs at the present time by paying a bit more and with the flex scheduling, etc. models. If Amazon bleeds the labor out of these grocery competitors then they could win the grocery business by default and on their terms.
I agree 1000%, and this is a much more massive issue than anyone else wants to give them credit for.

They do not have the hiring difficulties retailers and restaurants do... Except in the Fresh stores. And I think I know why.

I cannot believe the abuse my employees have endured on a daily basis in our stores since the start of the pandemic. They were very resilient at first because they loved their bosses, the product, and the brand. However the constant harassment, temper tantrums, profanity and even violence took their toll. And all of this was happening during the massive Amazon expansion of local delivery hubs and urban facilities. Amazon was the reason to move to the remote areas of the Inland Empire in SoCal as you could make a decent living with the much lower cost of housing and seemingly unlimited growth of warehouses. You could start and work your way up the ladder as two warehouses became four, became eight, and so on exponentially. Similar stories have happened in other areas where Amazon placed their massive facilities.

But now Amazon has buildings all over the place in the urban areas. They're right in the thick of local industrial parks, dead malls, closed strip malls and even buying out unusual facilities like storage facilities to tear down and build these new local buildings that simplify their logistics operation. They're paying more than restaurants and retailers, even if it's just a couple of dollars more. But there are also hours consistently, and extra hours during the holidays instead of seasonal employees flooding the schedule. The majority of the employees are full time. And the part timers are true part time by choice working the flex schedule system where they choose the shift they want.

This is the real silent killer. Retailers that have forced a 100% part time model on non supervisory employees are paying the price. Most part time retail employees are working in two or three stores to try to maintain full time hours, which was resulting in scheduling problems as they would call out at the job they liked the least (and nobody is managing attendance due to COVID, they just lie and say they have a fever of 103). That was bad but then Amazon dropped a delivery hub nearby and guess what happens? Now you get one real, full time job. You quit all of your part time jobs. You make more money and you have more free time because you're not having to drive from job 1 to job 2 to job 3.

But that is only the beginning. In that facility you don't have the customer. The same customer who spit in your face when you politely told them the state or whoever is requiring you to wear a mask, or not drink your Big Gulp in the store. The customer who said "f___ you" when you told them they too have to wait in line due to government mandated capacity limits. And then shoved you out of the way and barged into the store as if they weren't going to be prosecuted for battery (yes this happened and we did press charges). A Manager who just lost her mother to COVID at her first day working after the funeral - who was screamed at when she asked a customer to wear a mask and was told that COVID is a lie and nobody is dying of it. And so on. The traumatic experiences my employees shared were completely horrifying, and my stores are, let's just say, a place you go to have fun and be inspired. Not a grocery or drugstore where you buy essentials. So if my employees were treated like they were human garbage while selling fun products, I can't imagine how much worse it was elsewhere.

So the abused employee who doesn't want to be in that kind of terrible environment finds their escape at the Amazon delivery hub or other local facility. Two or three of these part time jobs are now open elsewhere. The retail stores and restaurants are decimated of staff, and you see things like the General Manager on the cash register alone, or taking orders at dinnertime at a restaurant.

Quite frankly, the abusive customers are getting what they deserve when they go into a understaffed retailer or restaurant. They made it that way by treating the help so terribly. And as has been the history of the United States so many times, the downtrodden and abused rise up and say no more. They're not doing it as a group as in the past, that's why we aren't seeing mass union drives etc., they're doing it one at a time as they exit the customer facing retail and restaurant business. The lousy treatment by the part time employer was mildly tolerable for years. But when the customer turned on the part time employee, that was what pushed them out the door. And Amazon was waiting for them with open doors.
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