Crisis at US Amazon, Driving Grocery Business Forward

[Asia Economy Reporter Yujin Cho] Amazon, facing its biggest crisis since its founding amid economic recession and poor performance, is accelerating its offline grocery business acquired five years ago.

According to major foreign media on the 13th (local time), Amazon CEO Andy Jassy announced that this year, the offline grocery business will be expanded to twice its current size. In a recent interview with local media, CEO Jassy said that during the COVID-19 pandemic, they took time to reorganize for re-entering the offline grocery business.

Amazon entered the grocery distribution business by acquiring Whole Foods, the largest organic grocery chain in the U.S., in 2017. The acquisition amount was $13.7 billion (approximately 17.42 trillion KRW), the largest merger and acquisition (M&A) in Amazon’s history at the time. However, as the offline business shrank due to the rise of the contactless market during the COVID-19 pandemic, the grocery distribution business was also put on hold. The Whole Foods segment accounts for 3.4% of Amazon’s total sales, and its sales growth rate over the past five years was only 10%.

Through the pandemic, the distribution paradigm changed, and Amazon saw new opportunities in this process. CEO Jassy said, “During the pandemic, we couldn’t do many ‘normal things,’ and in this process, we experimented with various aspects such as payment methods, store classification, and price ranges.” He added, “(These plans) are still in the early stages,” but “I hope this year will be the first year of offline business expansion in a physical sense.”

[Image source=Reuters Yonhap News]

Following Whole Foods, Amazon operates the grocery store 'Amazon Fresh' and the cashier-less store 'Amazon Go' which applies an unmanned payment system. Amazon Go, first introduced in 2016, is an unmanned store where customers select items through a smartphone app and can walk out without going through a checkout counter, with automatic payment processing. Amazon plans to expand unmanned stores like Amazon Go to reduce dependence on online shopping business and strengthen its presence in offline business.

The offline business was also mentioned as a key initiative when Amazon founder and former CEO Jeff Bezos announced his departure from the management front line in 2021. Starting as an online bookstore in 1994, Amazon has pushed out leading companies in every field it entered?distribution and logistics, digital content, cloud, media, space development?creating a new term, 'Amazoned,' referring to being overtaken by Amazon as a latecomer.