Amazon Fresh puts NJ expansion plans on hold

Plans to open additional Amazon Fresh supermarkets in New Jersey are on hold as the company revaluates its grocery strategy in an effort to set itself apart from the competition.

During the e-commerce giant’s quarterly earnings call Feb. 2, Chief Executive Officer Andy Jassy said the company paused expansion of its Fresh supermarkets and Go convenience stores until it evaluates how to make the chains more appealing to shoppers.

“We’ve decided over the last year or so that we’re not going to expand … until we have that equation with differentiation and economic value that we like, but we’re optimistic that we’re going to find that in 2023,” Jassy said.

Amazon also plans to close some of its 44 supermarkets and 28 convenience stores, though it did not specify which locations will shut – or have already shut – their doors.

After Amazon Fresh made its New Jersey debut last summer in Paramus, the company planned to open stores in Lodi, Eatontown, Holmdel and Woodland Park.

Chief Financial Officer Brian Olsavsky said the decision “to exit certain stores with low-growth potential” was made following a periodic assessment of the company’s grocery portfolio and that it took a $720 million impairment charge in the fourth quarter as a result.

Make it work

Though Amazon has owned Whole Foods Market since 2017, the company has attempted to tap further into the grocery market with its three-year-old brick-and-mortar concept.

While Jassy said Whole Foods is growing and remains a leader in premium, organic grocery, Amazon’s mass market offering needs work.

“We’re doing a fair bit of experimentation today with those stores to find the format that we thinks resonates with customers, is differentiated in some meaningful fashion, and where we like the economics,” he said.

The CEO also added, “We’re working hard at it. We see some encouraging signs, and when we do find that equation, we will expand it more expansively.”

Jassy’s remarks are the first time Amazon has publicly addressed reports that the chain halted Amazon Fresh’s rollout.

In December 2022, The Information reported that Amazon had not opened a location in four months and that a handful of built-out stores sat vacant, a sign that the company was pulling back its grocery strategy.

Within New Jersey, a site in Lodi is among the company’s 22 “zombie” locations – stores that are set up but haven’t opened.

Amid slowing sales and economic uncertainty, Jassy has taken steps to cut costs across Amazon, including the elimination of 18,000 jobs, adding fees for grocery deliveries and cutting back from warehouse expansion.

For the fourth quarter, Amazon posted $149.2 billion in revenue — a 9% increase from the same period last year, which was better than expected. However, it was the company’s least profitable Q4 ever, with Amazon earning $0.3 billion for the period, down from $14.3 billion a year prior.

For the full year, Amazon posted a net loss of $2.7 billion, its first since 2014.

During the earnings call, Olsavsky indicated that slowing growth and tight margins would continue “for the next few quarters.”