Amazon (AMZN) has recently launched a handful of new Fresh supermarkets in recent months, after some delay. The e-commerce major hit pause on the expansion of its Fresh supermarket stores over a year ago. However, since June, seven other Fresh stores have opened across multiple states in the U.S., with more stores expected to be launched soon. In addition, Amazon is also redesigning its five existing stores in Illinois and California.
Why Did Amazon’s Foray into the Grocery Market Come to a Halt?
Amazon first made a foray into the grocery market after it acquired Whole Foods for $13.7 billion in 2017. The e-commerce giant’s Fresh chain first made its debut in 2020, aiming for lower prices than Whole Foods. However, by early 2022, with 46 Fresh locations worldwide, the company faced some setbacks. The company’s then-CEO Andy Jassy’s cost-cutting initiatives amid difficult macro conditions led to layoffs and the closure of some stores. This caused a halt in the company’s expansion of the Fresh chain.
Furthermore, early last year, Jassy announced that the company planned to close some additional Fresh supermarkets and Go convenience stores, putting future openings on hold until Amazon could refine its store format.
AMZN Redesigned Its Fresh Stores
However, since late last year, the company tested out a redesigned store format and is now re-launching these stores. The company’s management has acknowledged that brick-and-mortar stores are needed to grow its “very large” grocery business.
As part of this redesign process, the company’s initiatives include a more colorful store layout, adding coffee stalls, and removing the cashierless checkout technology called “Just Walk Out”.
Following the redesigned format of the Fresh stores, Amazon has seen increased sales and improved customer satisfaction. In fact, Jassy expressed optimism during the company’s Q1 earnings call, saying the redesigned stores have performed better in many areas, though there is still work to be done.
Is AMZN Stock a Buy?
Analysts remain bullish about AMZN stock, with a Strong Buy consensus rating based on 42 Buys and one Hold. Over the past year, AMZN has increased by more than 20%, and the average AMZN price target of $222.88 implies an upside potential of 25.4% from current levels.
