Despite opening Fresh supermarkets, many locations remain vacant after a yearlong stall.

• Amazon has resumed opening new Fresh supermarket locations after a yearlong pause.
• In February 2023, Amazon CEO Andy Jassy stopped the growth of the Fresh line because the stores did not meet the company's standards.
• Despite construction being finished, 22 supermarkets across the country remain vacant, according to city officials and local news reports.

A crowd of around 300 people gathered on a hot summer afternoon in August outside a new Fresh supermarket in a Philadelphia suburb, excitedly waiting for the store to open. A person dressed as a banana entertained the crowd, while Amazon employees distributed free samples of cold brew coffee.

The Fresh store in Bensalem, Pennsylvania, has been waiting to open since 2022. Despite its readiness, the store has remained vacant for months, with an Amazon logo on a sign overlooking an empty parking lot.

""Despite my anticipation that it would open, it didn't. Then, suddenly, it was ready to go," Joe Knowles, Bensalem Township's council president, shared with CNBC."

In recent months, Amazon has launched several new Fresh stores, including the Bensalem location, which is one of a handful of new openings. This marks the first new store openings since the company halted expansion of the franchise more than a year ago. Since June, Amazon has opened seven other stores in California, Illinois, Maryland, New Jersey, and Virginia, with more locations expected this year and into next. Additionally, the company is launching five redesigned stores in Illinois and California this week.

Amazon's pursuit of dominance in a market it has been targeting for 17 years, culminating in its $13.7 billion acquisition of Whole Foods in 2017, has been marked by a scattershot approach that has shifted between expanding its "everything store" mission and making high-end produce more affordable. In some instances, the markets have served as a testing ground for in-store technologies.

In 2023, Amazon's U.S. grocery market share was 1.4%, compared to 23.6% and 10% of Walmart and Kroger, respectively, according to Numerator data.

Amazon's portfolio includes fresh supermarkets, Go convenience stores, same-day delivery for Prime members, and an unlimited grocery delivery subscription in the U.S. On Tuesday, the company launched a new grocery private label called Amazon Saver, which includes items like pancake syrup, deli meat, and canned goods mostly priced under $5.

Amazon launched its first Fresh store in September 2020, in the Woodland Hills neighborhood of Los Angeles, with the aim of providing lower prices than Whole Foods. The store included package drop-off counters, cashierless checkout lanes, and voice-activated displays that enabled customers to seek recipe suggestions or locate products using Alexa.

Despite plans to expand to 46 Fresh locations worldwide by early 2022, Amazon's efforts to control costs, driven by rapidly changing macro conditions, resulted in mass layoffs and the closure of some unproven bets.

In February 2023, Jassy announced on a quarterly earnings call that Amazon planned to shut down some Fresh supermarkets and Go convenience stores. He also put a hold on expanding its Fresh footprint until the company could determine a store format that appealed to customers and had favorable economics, Jassy stated.

Krispy Kreme donuts

Amazon is investing heavily in its Fresh grocery business by opening new stores and refining the shopping experience. Jassy and Amazon Fresh leaders recognize that to grow the business, they need a larger physical presence.

In 2022, only 11% of sales in the $1.6 trillion U.S. grocery market were made online, which is significantly lower than the level of e-commerce penetration in other categories, such as consumer electronics, where 41% of purchases were made online, according to Jefferies data. Analysts from the bank wrote in a note in October that companies "need to have a physical presence to be big in grocery."

Amazon redesigned its Fresh stores by introducing a brighter layout and Krispy Kreme donut and coffee stalls. In April, the company announced that it would replace its cashierless checkout technology, Just Walk Out, with computerized Dash Carts in its U.S. Fresh stores and Whole Foods markets.

Amazon has reported higher customer satisfaction scores and increased purchasing at its redesigned Fresh locations, according to CNBC. The company plans to selectively open new Fresh locations based on customer feedback.

"Jassy expressed his satisfaction with the early results of the revamped Fresh stores during the company's first-quarter earnings call in April. He stated that the stores were significantly improved in almost every aspect and that there were still some areas to address."

Despite construction being complete, at least 22 supermarkets across the country remain vacant or unopened, according to city officials and local news reports.

At least five lawsuits have been filed due to delayed openings or cancellations. Landlords in Pennsylvania, New Jersey, New York, Florida, and Washington accused Amazon of breaching its contract by terminating its lease, with some parties seeking damages worth tens of millions of dollars. Amazon settled with property owners in Florida and Washington last year, as per court documents. However, attorneys representing the property owners did not respond to requests for comment.

Amazon declined to provide information on the status of the Fresh stores that have not yet opened.

A Stein Mart department store in Rancho Mirage, California, a desert town about 30 minutes southeast of Palm Springs, is currently in limbo. The store is located in a shopping center that also houses a Hobby Lobby, an Italian restaurant, and a blood bank. Shoppers in the area can easily access a Whole Foods, Walmart, Trader Joe's, and Aldi, all within a short drive.

In 2021, Amazon started renovating its store and put up signage the following year. However, "opening soon" signs are still visible on the doors. According to Ted Weill, a city council member, the company anticipates opening the store in 2025, as they have informed Rancho Mirage officials and the owner of the shopping complex, AlbaneseCormier.

AlbaneseCormier didn't respond to a request for comment.

Few companies can afford to keep a building idle for extended periods, as Weill stated.

"Weill stated that Amazon's vast financial resources allow them to make investments of any amount, and if they decide not to proceed with the project regardless of the investment amount, it will not hinder their decision."

In the Sacramento suburb of Roseville, Amazon opened a Fresh supermarket more than 500 miles north of Rancho Mirage. The store was completed by last summer.

Last month, Brent Thill, an analyst at Jefferies, drove his 16-year-old son to Roseville from the Bay Area to check out the newly opened Fresh store. Thill was impressed with the supermarket's "amazing" selection but found the overall atmosphere to be "sterile."

"As Thill described, walking into the Amazon Fresh store in Roseville is like being in a sleek stainless steel wine cellar, with no decorations to be seen, just a massive structure."

Although Thill has a buy rating on Amazon stock, he claims that the company is spending a significant amount of money to compete in "one of the lowest-margin businesses on the planet." However, he considers it "one of the highest budget items in the pocketbook," which aligns with Amazon's broader retail strategy.

If Amazon can make returns more unique, there may be synergies, and the outcome is uncertain, Thill stated.

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