Amazon's sprawling grocery business has become an ‘expensive hobby' with a cloudy future
Amazon has spent almost three decades perfecting the art of bringing everything imaginable to your doorstep in the shortest amount of time, at the lowest possible price. By almost any measure, it's been one of the greatest corporate successes in history.
But despite Amazon's unquestioned dominance in e-commerce, one giant market has proven particularly vexing: groceries.
Amazon has introduced a dizzying array of services — Prime Now, Fresh, Go and others — in its effort to become a giant in the $750 billion U.S. grocery market. In 2017, it spent $13.7 billion to acquire Whole Foods, a price tag more than 10 times higher than Amazon had paid in any prior deal.
Still, it's just a niche player in the industry. As of mid-December, Amazon.com and Whole Foods accounted for a combined 2.4% of the grocery market over the past 12 months, while Walmart controlled 18%, according to research firm Numerator. Amazon's delivery services have struggled to stand out in a crowded field, while the Go automated convenience stores have been deprioritized, according to people familiar with the company's strategy.
On founder Jeff Bezos' watch, shareholders expressed little concern about this corner of the Amazon empire. The company's stock price soared almost 400% in his last five years at the helm, boosted by e-commerce growth and a booming cloud business.
The story has changed since July, when Bezos was succeeded as CEO by longtime cloud chief Andy Jassy. The stock has dropped by about 13% in that time and was the worst performer in the Big Tech group last year. Amazon just reported its slowest growth rate for any quarter since 2001.
That may give investors a reason to start looking for things they don't like. One area of scrutiny could be Amazon's physical stores unit, which includes Whole Foods and Fresh stores. It saw lower sales in 2021 than in 2018, even as its footprint of leases expanded by 17% over that stretch.
“Amazon's all about the cloud, e-commerce and entertainment,” said Jake Dollarhide, CEO of Longbow Asset Management, which has counted Amazon has a “core holding” since 2011. “It's almost like the grocery business is an expensive hobby.”
Competition is everywhere. Entrenched players such as Walmart, Target, Kroger and Albertsons are getting savvier with digital offerings, thanks to the pandemic jolt. Meanwhile, Instacart, Uber, DoorDash and Gopuff are throwing money at speedy delivery, Amazon's sweet spot.
With Jassy now plotting the road ahead for Amazon and its disjointed portfolio of high-cost grocery assets, CNBC talked with insiders and former employees about how the company got to this point and where it goes from here.
Most of the people who agreed to be interviewed did so on condition that they not be named because they weren't authorized to speak about their experiences or they feared retribution from the company.
They portrayed an environment of intense internal competition for resources and said culture clashes ensued when groups came together. Part of that is intentional, as Bezos fostered a workplace of competing ideas. It's also created chaos and a lack of clear direction.
Amazon declined to provide commentary on the record for this story or make any executives available for interviews.
Fresh vs. Prime Now
The year 2017 marked an inflection point for Amazon's grocery strategy.
Late that year, two rising stars at Amazon were called into a meeting to rethink how the company delivers groceries.
Amazon was pouring money into the Prime Now rapid delivery program and the Amazon Fresh grocery delivery service.
Bezos wasn't happy. He saw Fresh and Prime Now as too similar to justify the hefty investment that each required. That problem was amplified by the Whole Foods acquisition, which made Amazon's grand ambitions clear to the competition and led investors to dump shares of other grocery chains.
Amazon leadership summoned Stephenie Landry, who ran Prime Now, and Ben Hartman, head of Amazon Fresh, to the company's Seattle headquarters. They were told to prepare for a “bake-off” that would determine the path forward for the company's online grocery business, according to people familiar with the matter.
It was a pivotal moment for Amazon. The Fresh delivery service had been around since 2007, when longtime executive Doug Herrington, a former vice president at dot-com grocery flameout Webvan, launched an initiative to drive fresh fruits, vegetables, meat and milk in temperature-controlled tote bags to some residents in the Seattle suburb of Mercer Island.
Andrea Leigh remembers the early days of the grind, trying to make it in the low-margin business. Having worked in Amazon's media, grocery and gourmet and baby categories, Leigh was on maternity leave in 2010 when she was brought back to help Fresh make money so it could grow beyond Seattle.
亚马逊花了近三年的时间来完善以尽可能低的价格在最短的时间内将所有可以想象的东西带到您家门口的艺术。以任何标准衡量，它都是历史上最伟大的企业成功之一。 但是，尽管亚马逊在电子商务领域的主导地位毋庸置疑，但事实证明，一个巨大的市场尤其令人烦恼：杂货。
亚马逊推出了一系列令人眼花缭乱的服务——Prime Now、Fresh、Go 等——努力成为 7500 亿美元的美国杂货市场的巨头。 2017 年，它斥资 137 亿美元收购了 Whole Foods，这一价格比亚马逊之前任何交易支付的价格都高出 10 倍以上。
尽管如此，它只是该行业的小众玩家。根据研究公司 Numerator 的数据，截至 12 月中旬，亚马逊和 Whole Foods 在过去 12 个月中合计占杂货市场的 2.4%，而沃尔玛控制了 18%。据熟悉该公司战略的人士称，亚马逊的送货服务一直难以在拥挤的领域中脱颖而出，而 Go 自动化便利店则被取消了优先级。
在创始人杰夫·贝佐斯（Jeff Bezos）的监督下，股东们对亚马逊帝国的这个角落几乎没有表现出担忧。在电子商务增长和蓬勃发展的云业务的推动下，该公司的股价在他掌舵的最后五年中飙升了近 400%。
自 7 月以来，情况发生了变化，当时 Bezos 由长期担任云计算业务负责人的 Andy Jassy 接任 CEO。该股当时下跌了约 13%，是去年大型科技集团中表现最差的股票。亚马逊刚刚公布了自 2001 年以来任何季度的最低增长率。
这可能会让投资者有理由开始寻找他们不喜欢的东西。审查的一个领域可能是亚马逊的实体店部门，其中包括 Whole Foods 和 Fresh 商店。它在 2021 年的销售额低于 2018 年，尽管其租赁足迹在此期间扩大了 17%。
“亚马逊专注于云、电子商务和娱乐，”Longbow Asset Management 的首席执行官 Jake Dollarhide 说，该公司自 2011 年以来一直认为亚马逊拥有“核心控股权”。“这几乎就像杂货业务是一种昂贵的爱好。”
竞争无处不在。由于大流行的冲击，沃尔玛、塔吉特、克罗格和艾伯森等根深蒂固的参与者越来越精通数字产品。与此同时，Instacart、优步、DoorDash 和 Gopuff 正在向亚马逊的“甜蜜点”快速交付投入大量资金。
随着 Jassy 现在为亚马逊及其杂乱无章的高成本杂货资产组合规划前进的道路，CNBC 与内部人士和前员工讨论了该公司如何走到这一步以及它从这里走向何方。
大多数同意接受采访的人都是在不透露姓名的情况下这样做的，因为他们没有被授权谈论他们的经历，或者他们害怕受到公司的报复。
他们描绘了一种内部资源激烈竞争的环境，并表示当群体聚集在一起时，文化冲突随之而来。部分原因是故意的，因为贝佐斯培养了一个充满竞争想法的工作场所。这也造成了混乱和缺乏明确的方向。
亚马逊拒绝就此事发表评论，也拒绝让任何高管接受采访。
新鲜与 Prime Now
2017 年标志着亚马逊杂货战略的转折点。
那年年底，亚马逊的两位冉冉升起的新星被召集到一次会议上，以重新思考该公司如何提供杂货。
亚马逊正在向 Prime Now 快速配送计划和亚马逊生鲜杂货配送服务投入大量资金。
贝索斯不高兴。他认为 Fresh 和 Prime Now 过于相似，无法证明各自需要的巨额投资是合理的。收购 Whole Foods 放大了这个问题，这使得亚马逊的雄心壮志在竞争中变得清晰，并导致投资者抛售其他杂货连锁店的股票。
亚马逊领导层召集了 Prime Now 的负责人斯蒂芬妮·兰德里和亚马逊生鲜业务的负责人本·哈特曼到公司的西雅图总部。据知情人士透露，他们被告知要为决定公司在线杂货业务未来发展方向的“烘烤”做准备。
这对亚马逊来说是一个关键时刻。自 2007 年以来，Fresh 送货服务就已经存在，当时长期执行官、互联网杂货店熄火 Webvan 的前副总裁 Doug Herrington 发起了一项倡议，将新鲜水果、蔬菜、肉类和牛奶装在温控手提袋中运送给一些居民在西雅图的默瑟岛郊区。
Andrea Leigh 记得早期的艰苦努力，试图在低利润业务中取得成功。曾在亚马逊的媒体、杂货店、美食和婴儿类别工作过的 Leigh 于 2010 年休产假，当时她被带回帮助 Fresh 赚钱，以便在西雅图以外的地区发展。
