Amazon is turning the page on their venture into books and retail. Amazon announced Wednesday that it will permanently close 68 brick-and-mortar retail stores to focus on groceries and fashion, reports GeekWire. Retail stores affected include the company’s Amazon 4-star, Books, and Pop-Up stores. Amazon is shuttering 68 brick-and-mortar locations in total, including 24 bookstores, 33 Amazon 4-Star locations, and nine mall kiosks. According to Bloomberg, Amazon was planning to open sixteen more 4-Star locations.
The retail giant is planning to focus more on its Amazon Fresh, Whole Foods Market, and Amazon Go grocery and convenience stores, as well as fleshing out their Amazon stores’ Just Walk Out Technology, says GeekWire. Another primary focus will be Amazon Style, the company’s foray into fashion.
“We remain committed to building great, long-term physical retail experiences and technologies, and we’re working closely with our affected employees to help them find new roles within Amazon,” wrote Amazon in a statement.
Reuters reported that Amazon will identify new roles within the company for employees at the shops that would be closing. Workers could be relocated to other Amazon store locations. Those who do not want to stay with the company will receive severance pay.
Growing grocery market share
Why the big change? Amazon’s brick-and-mortar retail stores have lacked a significant presence, and their revenue only made up 3% of revenue for the company in the most recent quarter, says Bloomberg. In 2021, Amazon saw lower sales than they did in 2018, including Whole Foods and Fresh stores. CNBC reported in February that Amazon’s grocery business had become an expensive hobby, and they hadn’t quite made a dent in the grocery market yet.
In mid-December, Amazon’s website and Whole Foods only accounted for 2.4% of the grocery market in 12 months. For comparison, Walmart controlled 18% of the market in that same period. Kroger came in second, dominating 8.8% of the grocery market, followed by Costco at 6.4%, according to Numerator and CNBC.
Currently, Whole Foods has the company’s largest grocery presence with 450 locations. In addition, Amazon has been opening its own separate grocery stores. In major metropolitan areas, customers can take advantage of Amazon Go. Shoppers can tap an in-store code, grab what they want, and leave. The retail giant also offers in-store Amazon Fresh, where consumers can have a more traditional grocery shopping experience, or take advantage of Just Walk Out technology as well. Fresh also offers two-hour delivery in many areas.
A focus on fashion
Amazon also wants to shift some of its focus to fashion. In January, the company announced their first physical fashion store, Amazon Style, to complement its online fashion options. Previous ventures into fashion include Prime Closet, where users can try an item for free, and either purchase or return it, as well as Outfit Compare. Outfit Compare lets shoppers choose between one outfit or another, depending on the occasion. Amazon Style’s physical location will be opening at The Americana at Brand in Los Angeles later this year, GeekWire reports. The venture into fashion makes sense, as it surpassed Walmart as the top apparel retailer in the U.S. Amazon made $45 billion in revenue off of their apparel and footwear in 2021.
The shopping experience at Amazon Style will reportedly rely heavily on Amazon’s existing technology. The physical store will feature a less-cluttered display, and shoppers will be able to scan QR codes to see sizes, colors, ratings, as well as other details about the item. Shoppers can tap a button to have the desired item sent to a fitting room or directly to the pickup counter. A screen in the fitting room will let shoppers continue to shop additional styles. Algorithms will be able to give shoppers real-time recommendations.
Insider Take
Amazon has always been quick to try new things and abandon them if they don’t work, but this is a surprising development. Putting a greater focus on groceries makes sense, especially given their investment in Whole Foods, but leaning into Amazon Fashion is a little more puzzling, especially since the first Amazon Style store hasn’t opened yet. Will this be a good move for Amazon or a bust?
