Amazon halts rollout of Fresh stores across the UK | Amazon to shut Amazon care service | Peloton strikes deal to sell products on Amazon

Amazon halts rollout of Fresh stores across the UK

Amazon has reportedly halted plans to open hundreds of its ‘Just Walk Out’ powered Amazon Fresh stores in the UK. The US retail giant has called off the search for new locations for its convenience stores, and walked away from talks on dozens of sites, according to a source close to the project cited in The Sunday Times.

Amazon opened its first checkout-free convenience store in Ealing in March last year, its first physical retail site outside North America. The stores allow customers to scan their phones on arrival, fill their bags with products and leave without any interaction with staff or a self-checkout machine.

The rollout has now reached 19 locations?– a rate of more than one opening a month?– all in London apart from the latest in Sevenoaks, Kent. Citing a source, The Sunday Times said sales at the stores had “fallen short of expectations”. In November last year , an internal document obtained by Business Insider found Amazon was planning an estate of more than 260 Fresh stores in the UK by 2025.

An Amazon spokeswoman said:?“We currently have 19 Amazon Fresh stores open in the UK and look forward to opening additional stores in the near future.” Despite the current tough period for Amazon, the company’s physical store sales are growing.

In a July earnings update sales at stores?– which include Whole Foods Market, Amazon Fresh and Amazon Go – increased by 12.5% in Q2 versus the same quarter in 2021, reaching just over $4.7bn. However, the retailer is having to work within an environment where price is increasingly more of a priority for consumers than convenience.

“People are shopping around between the retailers to find the best value products,” said Fraser McKevitt, head of retail and consumer insight at Kantar, which in its latest figures found grocery price inflation had hit 11.6%, the highest level since it first started tracking the data in 2008.

While Amazon’s online grocery offering is competitively priced versus rivals – in July provided the cheapest basket in the?Grocer 33 , and?last month ?launching a price-matching scheme with?Tesco ’s Clubcard?Prices ?across hundreds of products – physical store prices are more closely matched to Waitrose and supermarket convenience formats.

In a bid to boost footfall,?last month ?Amazon Fresh stores offered all Amazon Prime members a 25% discount on their in-store shops.

“The challenge for all autonomous, checkout-less stores is to get people to try them, and try them a couple of times,” said Kien Tan, senior retail adviser at PwC UK, at the time. “Before they’ve tried it, people don’t realise it’s simple and convenient and easy. You have to get people through the door to do that.”

In July last year, Amazon hired Tesco veteran Tony Hoggett to head up its international stores arm and lead the estate expansion. The company in 2019 hired former Sainsbury’s director of commercial operations Matt Birch to scope out potential Fresh sites in the UK. The local property team now boasts former Lidl GB head of property Oliver Barrett; store acquisition experts from Aldi and Tesco; and property leads from TfL, McDonald’s, Costa Coffee and Co-op.

Tambo's View: Amazon’s attempt?at physical retail?has?been primarily tech-driven. Whilst this is highly innovative and offers consumers?a unique?shopping experience, it is difficult for innovative tech to thrive in a market with high inflation, price hikes and a rising cost of living. For now, tech-driven consumers are taking a backseat and value-driven shopping has been shifted to the forefront of shoppers' concerns;?Amazon is adjusting its investments accordingly.

Amazon to shut Amazon care service

Amazon?is closing its primary care and telehealth service, a sudden move that follows the company’s deal to buy the One Medical chain of clinics.?Amazon Care, which was launched in 2019, will close by the end of the year, Senior Vice President Neil Lindsay said in an email to the company’s health care team.?

“This decision wasn’t made lightly and only became clear after many months of careful consideration,” Lindsay said in the email, which was reviewed by Bloomberg. “Although our enrolled members have loved many aspects of Amazon Care, it is not a complete enough offering for the large enterprise customers we have been targeting, and wasn’t going to work long-term.”

Lindsay said many displaced workers will have opportunities to join other teams within Amazon. Kristen Helton, who ran Amazon Care, is on a break that began earlier this summer, Bloomberg reported earlier this month.

Amazon Care overlaps with services provided by One Medical, which Amazon said in July it would acquire in an all-cash deal valued at $3.49 billion. One Medical, whose parent is called?1Life Healthcare Inc. , operates 182 medical offices in 25 markets in the US. Customers pay a subscription fee for access to its physicians and round-the-clock digital health services. Amazon in February announced plans to expand Amazon Care to 20 additional cities, including New York, Chicago, Miami and San Francisco.

Amazon for years has been trying to break into the health care industry. It purchased mail-order pharmacy PillPack Inc. in 2018 and joined a much ballyhooed health care venture with JPMorgan Chase & Co. and Berkshire Hathaway Inc. that fizzled out after three years.

Tambo’s View: This move is a potential indicator that telehealth is not as lucrative as Amazon had?initially predicted. However, this doesn't mean that the company is giving up on their healthcare initiatives. Amazon’s?ambitions in healthcare?have been years in the making?and are in fact?set to intensify?as?the company?is among the bidders for Signify Health, a home healthcare provider. We are yet to find out whether this will be a more profitable venture for them.?

Peloton strikes deal to sell products on Amazon

Peloton has struck a deal to sell its products on Amazon in the US as it looks to widen its range of distribution channels and raise brand awareness. Items on the platform will include the Peloton Bike, and a range of accessories and clothing.

Peloton said the tie-up will enable it to expand its distribution and engage with more Peloton members and prospective members in a new channel. It will also make its products more readily accessible as customers will be able to search for products on the platform to see if they are available for purchase and delivery in their area.

Peloton chief commercial officer Kevin Cornils said: “Expanding our distribution channels through Amazon is a natural extension of our business and an organic way to increase access to our brand. We want to meet consumers where they are, and they are shopping on Amazon. Providing additional opportunities to expose people to Peloton is a clear next step, as we continue to generate excitement for our unparalleled connected fitness experience.”

As part of the Amazon experience, customers will have the option to assemble the bikes themselves or select an add-on expert assembly option that is available across the majority of the US. This will be offered at no additional cost.

Jim Adkins, vice president of recreational and vocational categories at Amazon, said: “We are thrilled to have Peloton products available for our customers in Amazon stores is all about bringing their community and energising fitness routines into the home. With Amazon’s convenient shopping experience, we hope to further that mission by providing customers with high quality, innovative products to take their health and fitness to the next level.”

Tambo’s View: In an attempt to cut losses, Peloton recently?ceased?selling exclusively through its own e-commerce site and global showrooms. Moving to Amazon makes sense for struggling Peloton as Amazon's Prime subscriber base is an extremely attractive potential customer base. Plus, Prime benefits including fast shipping and subsidised promotional spend would help Peloton in improving its customer experience and unit economics.

That's all for this week.?For more news on Amazon and updates about Tambo?visit our?blog.