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AMAZON has closed three of its Go stores in a major city as the company admits it “couldn’t make the economics work”.
The Go locations in New York City shut on September 27, a company spokesperson confirmed.
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The tech giant said the leases for these locations were coming up for renewal and therefore decided the costs were too high.
The closed Go locations that featured the company’s Just Walk Out checkout technology were 11 West 42nd Street St., One Liberty and 30 Rockefeller Center.
Amazon is working to find new roles for affected employees within the company.
An Amazon spokesperson said: “When a lease comes up for renewal, it is standard business practice for retailers to evaluate their store portfolio and decide if it is best to renew or to close the location.
“In this case, while these three stores were performing well, we couldn’t make the economics work with the lease cost, so we’ve decided not to renew and have closed these locations.”
The stores at 200 Vesey St. and 150 E. 53rd St. in the Big Apple are still open.
Amazon Go currently has 17 stores in operation in the US, according to their website.
Amazon’s cashierless checkout system, Just Walk Out, aimed to revolutionize brick-and-mortar stores but has not achieved its expected impact, among other grocery ventures.
Jake Dollarhide, an analyst and co-founder of Longbow Asset Management, spoke about Amazon’s bold decision to enter grocery.
“Some people would call their foray into groceries a mistake, and that would be fair, to an extent,” Dollarhide said, Seattle Times reported.
“They’ve had more closures, resets, and renovations than they’ve actually introduced concepts at this point.”
Dollarhide has also called Amazon’s grocery business an “expensive hobby,” he told CNBC in February.
“Nothing has changed since Day 1 for Amazon groceries,” Dollarhide recently continued, per Seattle Times.
“Everything remains in flux.”
GROCERY STRUGGLES
Amazon recently decided to remove Just Walk Out from Fresh grocery stores, closed dozens of stores, paused new store expansions, and reformatted others.
Other recent changes to Amazon’s grocery business include laying off workers, shelving drive-up pickup sites, and experimenting with new subscription models for online shoppers.
Amazon launched Fresh in 2020 and rapidly expanded to 44 stores within two years.
The company has since closed three locations in the US, including one in Seattle’s Capitol Hill neighborhood, per Seattle Times.
It also planned to halt further expansion of Fresh stores last year.
Despite changes, Amazon remains committed to its grocery efforts, including Amazon.com, Amazon Fresh, Amazon Go, and Whole Foods Market.
However, analysts are skeptical about its success in the competitive grocery market, per the Seattle Times.
“We continue to be optimistic about what we’re doing in grocery,” Amazon CEO Andy Jassy said on an April investors call.
“We have lots of ways that we can continue to help customers satisfy their grocery needs.”
Amazon’s entry into the grocery business began nearly two decades ago with online nonperishable goods and expanded with Amazon Go, Fresh stores, and the Whole Foods acquisition in 2017.
Amazon’s grocery market share remains small compared to competitors like Walmart, Kroger, and Costco.
Walmart currently leads in both total grocery spending and e-commerce grocery sales.
Analysts such as Sucharita Kodali from Forrester believe Amazon is not a significant player in fresh foods and that traditional grocery chains like Kroger should not see Amazon as a major threat, per the Seattle Times.
Amazon’s online grocery sales, though growing, still lag behind Walmart’s.
The introduction of Just Walk Out technology in 2016 was a notable innovation but has not led to the widespread transformation Amazon had envisioned.
Industry observers and analysts remain skeptical about Amazon’s long-term success in the low-margin grocery industry.
