Amazon’s Grocery Business Needs a Massive Makeover
Six years after buying Whole Foods for $13 billion, it’s becoming increasingly clear that the company will need to spend a lot more to compete with Kroger and Walmart.
Time for a refresh.
Photographer: Christopher Dilts/Bloomberg via Getty Images
Amazon.com Inc. shares soared after the company on Thursday posted a “trifecta beat” by topping forecasts for retail revenue, Amazon web services revenue and margins. But the flood of optimism glosses over issues in Amazon’s grocery business. The company’s physical retail segment revenue — predominantly sales at Whole Foods — have grown by just 10% since 2018. That’s half the rate of Kroger Co. during the same time period. Amazon announced some minor upgrades to the business last week, but the segment really needs a massive makeover if it wants to compete.
The grocery business has dramatically changed since Amazon bought Whole Foods Market for $13 billion in 2017. Amazon’s most significant upgrade is to make its online delivery less exclusive. Amazon Fresh delivery service will soon be available to anyone, not just those who pay for Prime, the company’s leading subscription service. It’s a great offer. But Prime penetration across the US is already high at an estimated 170 million members, according to Consumer Intelligence Research Partners. For perspective, there are about 124 million US households.