Can Amazon actually make money on selling groceries?
Clearly it is innovating with new formats and services. Yet, Amazon’s cashierless stores, Echo or 2-hour delivery don’t deliver profits, yet.
In recent post, the folks at Nutrition Business Journal and New Hope Media catalog several of these Amazon innovations, but I believe miss a couple fundamental questions.
Amazon’s acquisition of Whole Foods simply adds serviceable distribution. Serviceable? Even with Prime and Prime Now, most consumers still opt to buy groceries in-store — and locally. Rightly, the NBJ authors cite costs of all online returns. On the plus side, Amazon gains the increased shopping frequency of a grocery shopper.
Ultimately Amazon needs to look at how it can contain costs. Returns can kill you and sooner or later some municipality is going to blow the whistle on the corrugated mountains that Amazon shopping creates.
Further, while this adds more and more upscale shoppers, Whole Foods is fantastic user experience laboratory. In fact, non-grocery manufacturers can also experiment with UX in data-rich retail laboratory, B8ta.
Thus, the Whole Foods move is proving a huge laboratory for retail innovation — at a reasonable cost, when viewed at Amazon scale.
Here’s the post.