Amazon and the lure of retail
The grass is always greener on the other side.
Amazon started as an online bookstore to compete with brick-and-mortar book stores. And compete it did, and successfully. Companies like Barnes & Noble Booksellers or Indigo or Books-A-Million are still in business but struggling. Think Netflix vs. Blockbuster Video.
From books to everything and everything online. But there was always the temptation to increase the distribution channel and bring the online presence to a physical location.
In 2015, Amazon opened a bookstore. Perhaps Amazon wanted a place for people to see its Kindle eReader, FireTV or Alexa; or as a place for people to pick up their Amazon shipments. It was a test. It ended in 2022. It was perceived not as a bookstore but more as a place to promote Amazon online marketplace.
But before that, Amazon opened Amazon Fresh in 2007. It was built as a mixed purpose venture - selling and delivering groceries. In 2017, it was the place to pick up groceries which you could order online.
In 2020, Amazon Fresh became a test ground for the Just Walk Out concept. A store filled with sensors and cameras which - in theory - allowed customers to walk into a store, pick whatever they wanted and just leave. All items accounted for and charged to your account. Same technology used in the Amazon Go stores opened in 2018.
You can imagine it was an experiment where technology was augmented by people who would verify all the transactions and help to improve the algorithms.
Another test was the Dash Carts, where the customer would scan the item as they put it into the cart. Similar process when you use the self-checkout in various stores.
It is January 2026, the Amazon Go and Amazon Fresh are closing. It was a test to see how the online experience can be expanded into physical space.
But the test is still running. In 2017, Amazon acquired (or rescued) Whole Foods Market grocery chain.
Why would Amazon do that? It acquired operational warehouses - masked as grocery stores - which could be used as distribution hubs for perishable high quality groceries. Providing customers with its Prime membership, Amazon would learn about buying habits for products which it couldn't deliver.
While Amazon Fresh and Amazon Go were testbeds, the Whole Foods project is an ongoing part of the 'we deliver everything' strategy.
Will Amazon succeed? Food distribution brings its own challenges. It’s unlike delivery of regular items, where the Amazon driver just drops items at the door. It can be delivered anytime even during the night and then sit there for hours before you pick it up. That won't work for groceries which might require refrigeration or can’t be outside in hot or freezing weather. Think about your favourite box of chocolate!
Grocery delivery requires a different model and customer participation. While it's easier to manage the logistics part of it, the customer participation is the headache here. Just don't mention the term 'drone delivery'. Amazon has been trying to make it happen since 2013 and again with the introduction of Prime Air in 2022. It's similar to the flying cars concept.
The recurrent pattern? Ideas which look great on paper, crumble at the encounter with reality. For every company it is tempting to expand using new channels and new products. But if your strategy was dominance in the online marketplace, you might find that just watering your lawn will deliver better results than admiring your neighbor’s grass.