In defence of Amazon and its physical stores strategy as Kroger and Walmart make big moves
RTIH recently published a 2022 recap article in which we discussed Amazon putting the brakes on the expansion of its UK checkout-free convenience stores.
The e-commerce giant, we argued, faces a make or break year in terms of its Amazon Fresh locations.
In doing so, we joined a growing chorus of critics of Amazon’s excursions in to the physical retail space.
Critics be damned, according to Brittain Ladd, a former supply chain consultant and Amazon executive.
In a LinkedIn post, he shoots back at the naysayers: “One of my favourite Amazon leadership principles is Leaders Are Right, A Lot. Leaders have strong judgement and good instincts. They seek diverse perspectives and work to disconfirm their beliefs.”
During December, as he approached completion of his first year working on Amazon’s physical stores, grocery, and specialty fulfilment businesses, Tony Hoggett took to LinkedIn to reflect on the e-commerce giant’s accomplishments in this space.
Hoggett departed Tesco to join Amazon in January of this year, leading the teams responsible for Amazon Fresh, Amazon Go, Amazon Style, Whole Foods Market, and the firm’s ultrafast delivery services.
Ladd believes that, in the case of Amazon's grocery business, the firm’s senior leaders, including Andy Jassy, Hoggett, Doug Herrington, Jeffrey Helbling, Claire Peters, and Peter Bowrey, have had no choice but to challenge the strategy being used.
This is due to Amazon's biggest competitors, Kroger and Walmart, making big moves that are increasing their market share by delighting customers with enhanced assortment, better pricing, remodelled stores, and increased last mile delivery options.
In addition, Kroger is acquiring Albertsons and it is also expanding the number of Ocado Group customer fulfilment centres to fulfil online grocery orders using robotics.
If the acquisition with Albertson's is successful, Kroger will operate over 5,000 stores. Amazon is at a severe disadvantage in this respect.
Ladd says: “Amazon is being criticised for not opening completed Amazon Fresh stores, and for not launching more stores. It is doing the right thing.”
“It has two new senior leaders joining the company, Claire and Peter, so it makes sense to give them time to get settled into the company before proceeding with building new stores.”
He adds: “Amazon is so far behind on store count, does it make sense to try and catch up? I have my doubts.”
“I have written post and articles where I recommend that Amazon shouldn’t compete against Kroger and Walmart in store count. For example, Amazon could acquire Kroger once it completes the acquisition of Albertsons.”
“However, I have also recommended that Amazon leverage a micro-fulfilment strategy. It appears it’s happening.”
Amazon Fresh Online
Amazon is installing a micro-fulfilment system from AutoStore inside a store located on Long Island.
It is testing a new concept there called Amazon Fresh Online.
Online grocery orders will be fulfilled via AutoStore's automated cube-based system; similar to Ocado's offering. Customers will not be allowed to shop in the store, and no pick-up option is being offered.
Ladd says: “I was made aware of Amazon Fresh Online from members of Amazon Fresh who contacted me, and asked me to speak with them off the record. There is legitimate concern about Amazon Fresh Online.”
“For example, choosing AutoStore, without also testing Attabotics, isn’t a good idea. Attabotics is a much better solution for use in densely populated urban areas. In addition, I would not carry ten days worth of inventory - Inventory must turn faster.”
“I support Amazon using a MFC strategy. Great job!”
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