Ironical! Online retail giant Amazon can't figure out physical stores
What's the story
Despite dominating the online retail space, Amazon is struggling to make a mark in the physical store arena.
The Wall Street Journal reports that the company has slashed its workforce for Amazon Go convenience stores by nearly 50% since 2023.
The stores, which provide an electronic payment option without human interaction, have failed to draw a regular customer base.
Expert opinion
Industry experts question Amazon's understanding of retail
Nick Egelanian, President of SiteWorks Retail, doubted Amazon's understanding of the retail sector.
He told the WSJ, "I don't think they really understand retail." He added that running warehouses and shipping goods efficiently isn't the same as dealing with a customer in person.
Jeff Edison, CEO of Phillips Edison & Co., echoed this sentiment, questioning Amazon's ability to connect with consumers through its physical stores.
Store closures
Trial and error approach to physical stores
Over the last year, Amazon has tried a range of store formats, only to shut most of them down later. These include bookstores, clothing outlets, and stores showcasing its best-selling products.
However, despite the failures, the company has achieved some success by licensing its "Just Walk Out" technology powering Amazon Go stores.
Ed Coury of RCS Real Estate Advisors hinted if you see these failed stores as a testbed for this tech, they are successful.
Tech adoption
'Just Walk Out' technology finds takers
Despite the challenges faced by Amazon Go stores, the "Just Walk Out" technology they were designed to test has been adopted by over 200 institutions.
These include educational institutes, sports venues, healthcare facilities and airports.
This way, Amazon can profit from marketing this technology without bearing the operational costs of running a store.
Strategy shift
Amazon shifts focus to grocery sector
As it struggles with the issues in the physical retail space, Amazon seems to be redirecting its attention toward its grocery portfolio.
The company bought Whole Foods Market for some $13.5 billion in 2017 and just recently announced that Jason Buechel, the CEO of Whole Foods, will now lead all of Amazon's grocery business.
This includes their Fresh and Go stores.