Amazon Fresh hits the reset button in time for Q2 earnings

Amazon Fresh, the grocery banner owned by the online retail giant, is getting the overhaul the company has been promising with the announcement Wednesday that it has renovated two of its Chicago-area locations. 

The retailer also announced on Wednesday that it is offering Amazon Fresh grocery delivery for the first time to shoppers who are not members of Amazon Prime, its $139-per-year premium service that provides a variety of perks, such as free shipping and discounts, among others.  

The rollout of the revamped stores and new delivery policy comes the day before the company's second quarter earnings call, where Amazon CEO Andy Jassy is expected to discuss the recent changes to the struggling banner.  

It’s been a rough year for Amazon Fresh, which has faced criticism for building and renting space in cities across the country, installing Amazon Fresh signs and then inexplicably never opening. The company now faces lawsuits in Florida, Minnesota and Michigan for its decision not to open the locations. Amazon also laid off hundreds of grocery workers as part of its restructuring.  

A fresh take 

The announcement of the redesigned stores in Schaumburg and Oak Lawn, Illinois, was revealed in a blog post from Amazon Fresh Worldwide Vice President Claire Peters, who wrote that the upstart grocery chain has expanded its selection with more than 1,500 new products. Shoppers will see the biggest changes in the dairy, snacks, home care, health and baking products aisles.  

Amazon Fresh in Schaumburg, Illinois. Photo courtesy: Amazon Fresh

“These stores now also offer a wider selection of international flavors, including a robust naan bread selection and international condiments and sauces from around the world,” Peters explained in the post. “Customers can pick up new grab & go sandwiches, salads, wraps and snack boxes for those busy weekends filled with family activities or stop in after work to grab take-and-bake pizzas, ready-to-heat burritos and ready-made meals to simplify dinner plans.” 

The revamped stores also now feature Krispy Kreme doughnut shops that sell a variety of coffee drinks, she wrote. Shoppers can also use the latest version of Amazon’s Dash Cart, a smart shopping cart that automatically charges purchases to their Amazon Prime credit or debit account. “Because everyone is welcome in our store, we’ve also installed self-checkout, giving customers even more ways to save time on their grocery trips and pick what works best for them,” Peters added. 

Krispy Kreme doughnuts at Amazon Fresh in Schaumburg, Illinois. Photo courtesy: Amazon Fresh

Shoppers who have their kids in tow during shopping trips to the Fresh stores can also treat themselves to a free piece of fresh produce from the “Fruit Freebies for Kids” kiosk, and Peters said the stores will host seasonal events to entertain shoppers.  

Brick-Meets-Click: A review 

Less than 24 hours prior to the announcement of the redesigned stores, grocery industry analyst Brick Meets Click released a report detailing some of the changes at the Schaumburg location and noting that the retail giant is at a grocery "crossroads."  

“The Amazon Fresh banner, which entered the physical U.S. market in the late 3Q 2020, is at a crossroads, and the team is searching for a formula that will attract more customers and build in-store traffic,” the report said. “So, rather than focus on the recent Prime Day, mainly an online event, we examined what’s changed recently now that Amazon Fresh has been under new leadership for over a year and a half. Some changes are big and easy to notice, while others require some historical perspective and a penchant for detail, and others are still in progress.” 

Amazon Fresh in Schaumburg, Illinois. Photo courtesy: Amazon Fresh

The report noted that a basket of commonly purchased items costs shoppers over 10% more online, not including fees and other charges. While prices vary between online and in-store purchases, most items cost shoppers more online, the report noted. “Amazon’s pricing strategy seems designed to encourage in-store shopping as it needs to build more traffic,” the report said. “It also appears they’re pricing for margin with pickup and delivery as these online segments collectively are already performing well and are driven more by convenience than costs.” 

The report continues to describe a brighter, more vibrant feel across the Schaumburg location, noting that “dark and barren walls” have been replaced with faux wood panels in the produce section, and a drop-down ceiling fixture was installed. Lighting is also “less intense” in the produce department. 

Amazon Fresh may have borrowed an idea from its sister company Whole Foods, strategically placing A-frame chalkboard signs around the store, creating “a more welcoming place to shop for fresh produce,” the report added. 

The produce section has also returned to selling produce by the pound, reversing an earlier move to sell items per unit. Cold and hot bars at the store also reverted to pricing items by the pound, the report noted. 

The store’s pastry case has also been re-envisioned, offering mainly fresh pastries, some of which are locally sourced.  

Additional observations from the report include: 

Amazon is also aiming to cut costs in returns to its online purchases by giving shoppers a $10 credit for in-store purchases for making any returns at the brick-and-mortar location, the report added. 

And in addition to the Dash Carts, shoppers can opt to make their purchases in a new self-checkout lane at the location. The report concluded by noting that “implementing new technology without a sound strategy and insights supporting it can lead to costly lessons and a degraded customer experience.” 

“Grocery leaders should embrace change, but also accept that some things will look better in theory than reality and recognize when there’s need to pivot and test a different approach, whether selling in-store or online,” the report said. 

Members-only no more 

In addition to the store redesign, Amazon is making another play at attracting shoppers to its Amazon Fresh stores. Shoppers in 12 metro areas—Austin and Dallas-Fort Worth, Texas; Boston, Massachusetts; Charlotte, North Carolina; Denver, Colorado; Nashville, Tennessee; Phoenix, Arizona; Portland, Oregon; Richmond, Virginia; and Sacramento, San Diego and San Francisco, California—can now receive delivery from Amazon Fresh without having to be a member of Amazon Prime. 

Shoppers who are not Prime members will pay $7.95 for orders over $100, $10.95 for those between $50 and $100, and $13.95 for orders under $50. Prime members pay $3.95 for orders between $100 and $150, $6.95 for orders between $50 and $100, and $9.95 for those under $50. Orders over $150 include free delivery for Prime members. 

“This service fee helps us offer great prices in our online and physical grocery stores as we better cover grocery delivery costs and continue to offer a convenient, fast and high-quality delivery experience,” the company noted.