Amazon Fresh closes three grocery stores including its first ever till-less branch which only opened two years ago
- Amazon Fresh stores in Ealing, Wandsworth and East Sheen all shut on Sunday
- Retail expert says Seattle-based firm is ‘struggling to make the move offline’
- Amazon says trio shut amid ‘optimisation decisions’ about ‘portfolio of stores’
Amazon has shut three ‘contactless’ grocery stores including its first which only opened two years ago, as an expert said the chain ‘grossly underestimated’ rivals.
The Amazon Fresh stores in Wandsworth and East Sheen both closed on Sunday along with the Ealing outlet, which was the first in the UK to open in March 2021.
Amazon said the trio were shut as part of ‘optimisation decisions’ about its ‘portfolio of stores’, but added that it still plans to open new stores in London later this year.
It comes after the Dalston store shut in January, and the closures mean it now has 17 Fresh outlets left – 16 of which are in London, and the other at Sevenoaks in Kent.
All staff affected by the closures will be offered a new role in other nearby Amazon store, with the firm still attempting to expand its grocery business. New stores in Moorgate and Liverpool Street are expected to be among the next openings.
But retail experts told MailOnline that Amazon was ‘struggling to make the move offline’, with one saying he expected more outlets to close in the ‘medium term’.
Visitors to Amazon Fresh shops scan an app upon entry and are then automatically billed for the items they pick up as they depart, without having to visit a till.
The company uses ‘Just Walk Out’ camera sensor technology, which tracks what people buy as they walk around the supermarket and then bills it to their account.
The now-closed Amazon Fresh branch on Ealing Broadway in West London, which became the chain’s first UK grocery store when it opened in March 2021, is a short walk away from four major supermarkets – a Morrisons, Sainsbury’s Local, Tesco Express and Marks & Spencer
The Amazon Fresh store in Ealing only opened just over two years ago (pictured in March 2021)
The Amazon Fresh store in Ealing, West London, was the first one in the UK to open, in 2021
The opening of the grocery stores ago was hailed as a huge moment for the industry at the time, but campaigners raised privacy concerns about how they operate.
Where are the Amazon Fresh stores located?
STILL OPEN (x17)
- Chalk Farm
- White City
- Canary Wharf
- Sevenoaks (Kent)
NOW CLOSED (x4)
- East Sheen
PROPOSED NEW STORES (x2)
- Liverpool Street
The 16 Amazon Fresh sites remaining across London are in Holborn, Southwark, Euston, Monument, Angel, Aldgate, Chalk Farm, Hoxton, Kensington, White City, Canary Wharf, Wembley, Richmond, Croydon, Hounslow and Chingford.
Retail and retail property expert Jonathan De Mello, founder and chief executive of JDM Retail, told MailOnline today: ‘These Amazon Fresh store closures come as no surprise – and I expect more will close in the medium term.
‘It is likely Amazon haven’t closed more mainly due to lease restrictions, and are waiting to break these leases at the contracted time. There are a number of reasons for these closures, and the additional closures that will likely follow.’
He said the first was ‘poor location strategy’, given that Amazon Fresh opened stores in ‘highly competitive areas, or areas that demographically don’t fit with the generally higher price points they offer relative to competitors’.
For example, the branch on Ealing Broadway, which became Amazon’s first UK grocery store when it opened in March 2021, is a short walk away from four major supermarkets – a Morrisons, Sainsbury’s Local, Tesco Express and Marks & Spencer.
Mr De Mello continued: ‘Better strategic research would have helped them to avoid such mistakes. It appears their approach was opportunity/supply side led, as opposed to strategically led.’
The second reason he gave was ‘underestimating the strength of local competition’, explaining: ‘The grocery sector in the UK is mature and highly competitive, and established grocers have strong supplier relationships that they can leverage to maintain margin, even in light of the current high inflation environment.
‘As a relatively new entrant, Amazon Fresh have not benefited from such supplier leverage, and moreover seem to have grossly underestimated competitor strength – in some instances opening in locations already saturated by strong grocery provision.’
Campaigners have raised privacy concerns about how the Amazon Fresh stores operate
Products to buy at an Amazon Fresh store, which is operated by camera sensor technology
The Amazon Fresh store in Ealing is one of three outlets which were shut by the firm on Sunday
And the third reason cited by Mr De Mello was ‘significant store fit-out costs given embedded technology’, pointing out that grocery items are ultimately a ‘high volume but low margin product’.
What retail experts say about Amazon Fresh
Retail and retail property expert Jonathan De Mello, founder and chief executive of JDM Retail
‘These Amazon Fresh store closures come as no surprise – and I expect more will close in the medium term. It is likely Amazon haven’t closed more mainly due to lease restrictions, and are waiting to break these leases at the contracted time. There are a number of reasons for these closures, and the additional closures that will likely follow:
- ‘Poor location strategy: Amazon Fresh have opened stores in highly competitive areas, or areas that demographically don’t fit with the generally higher price points they offer relative to competitors. Better strategic research would have helped them to avoid such mistakes. It appears their approach was opportunity/supply side led, as opposed to strategically led.
- ‘Underestimating the strength of local competition: the grocery sector in the UK is mature and highly competitive, and established grocers have strong supplier relationships that they can leverage to maintain margin, even in light of the current high inflation environment. As a relatively new entrant, Amazon Fresh have not benefited from such supplier leverage, and moreover seem to have grossly underestimated competitor strength – in some instances opening in locations already saturated by strong grocery provision.
- ‘Significant store fit out costs given embedded technology: and this whilst selling grocery, which ultimately is a high volume but low margin product. Amazon clearly have not achieved high volumes given relatively low observed footfall in their stores, and this has meant that these stores have struggled to pay back the significant initial investment they made.’
Retail and consumer analyst Robert Carruthers, director of research company ConsumerCast
He added: ‘Amazon clearly have not achieved high volumes given relatively low observed footfall in their stores, and this has meant that these stores have struggled to pay back the significant initial investment they made.’
Retail and consumer analyst Robert Carruthers, director of research company ConsumerCast, added that Amazon had ‘always struggled with physical stores’.
He pointed out that in March last year, Amazon confirmed plans to close all 68 of its physical bookstores, pop-ups and shops selling toys and home goods across the US and Britain.
Mr Carruthers told MailOnline: ‘Retailing is about more than just putting things for people to buy in a shop; it’s far more complex – you have to build brands and product ranges – and Amazon is struggling to make the move offline because of this.’
He said the Amazon brand is about ‘lack of ‘friction’ in terms of time and trouble in purchasing and delivery’, and the ‘Just Walk Out’ concept behind the Fresh stores was ‘meant to benefit from the locations it chose, mainly right by London stations, where people are in a hurry’.
One example of this was the first branch in Ealing, located near the busy rail interchange of Ealing Broadway, from which passengers can travel on the Central line, District line, Elizabeth line and Great Western Railway.
However, Mr Carruthers continued: ‘But the level of camera surveillance in their stores is so intrusive that even the most tech-happy of customers may have been given pause for thought about what trade off they’re making.’
He also said that the grocery market had shifted since the stores first launched in 2021, citing research by consumer group Which? that found food prices had risen by more than 25 per cent in the past two years.
Mr Carruthers said: ‘Price is now upmost in more consumers’ minds, even among busy London commuters, and saving a few seconds here or there may be less important. This is being reinforced by Tesco and its Clubcard prices and Sainsbury’s with Nectar.’
He also pointed out that in the wider context of Amazon International, of which its UK online and store operations are part, is ‘loss-making and as such is likely to be the target of cost cutting in order to rectify this’.
Concerns over the technology used in stores have also been raised by privacy campaign groups including Big Brother Watch, which said much of it is a ‘mystery’.
Jake Hurfurt, head of research and investigations at the organisation, told MailOnline today: ‘Amazon Fresh offers customers a total-surveillance shopping experience which is now being copied by other retailers.
‘Checkout free shops rely on intense AI powered tracking and data mining to monitor customers, but it is often a mystery what companies then do with this information.
‘Amazon, or any other company operating these dystopian shops, should make it clear to shoppers who can access this data and why, and how their information could be used.’
Amazon Fresh told MailOnline that the chain still hoped to open new stores despite the trio of closures – and that it is still aiming to grow the business.
Lindsay Campbell, a spokeswoman for Amazon, said: ‘Our goal is to build a best-in-class grocery shopping experience where Amazon is the first choice for selection, value, and convenience, including in the UK.
‘As part of that, like any physical retailer, we periodically assess our portfolio of stores and make optimization decisions along the way.
‘While we decided to close three Amazon Fresh stores, it doesn’t mean we won’t grow – this year, we will open new Amazon Fresh stores to better serve customers in the greater London area.
‘We are committed to our investment in grocery, and as we grow we’ll continue to learn which locations and features resonate most with customers.’
Among the campaigns that Amazon Fresh has pushed in the past year to entice shoppers was a Tesco Clubcard Price Match scheme launched in July 2022.
Three Amazon Fresh grocery stores including the first ever cashless branch in Ealing have shut
The company uses ‘Just Walk Out’ camera sensor technology, which tracks what people buy
That saw Amazon become the latest retailer to use such a campaign in its marketing efforts to drive customer numbers, with Tesco and Sainsbury’s operating promotions matching the prices of key items against those of German discount rival Aldi.
The now-closed East Sheen branch opened in November 2021 and the Wandsworth one followed one month later in December 2021.
The Dalston store opened in September 2021, meaning it was open for less than 18 months before it closed at the start of this year.
It comes after Amazon said in January that it planned to shut three UK warehouses in Hemel Hempstead, Doncaster and Gourock – putting 1,200 jobs at risk.
But the Seattle-based company added at the time that it was hoping to open two new centres that will create 2,500 jobs over the next three years.
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