Amazon is preparing to shut all 19 of its Fresh stores in the UK, just four years after the firm launched its first grocery shop in London.
The stores allow customers to walk out with their shopping without having to use a till, instead using the app to enter.
Cameras monitor what people are purchasing and they are charged accordingly when they leave.
The concept, however, has proved to be problematic as many customers still prefer some form of human interaction with others opting to stay loyal to their favourite supermarket.
The i Paper spoke to experts to find out why Amazon, despite being one of the largest companies in the world, was unable to find success with its Fresh shops in the UK.
Brick and mortar stores on the high street have been suffering for years and Amazon Fresh’s closure shows that difficulties investing in physical shops remain, experts warn.
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David Gilbert, from The CFO Centre and former finance director of The White Company and Karen Millen, said: “Amazon Fresh’s downfall shows the pressure the British high street is under.
“Retailers have been under pressure for years, especially those with a large shop estate.
“This includes from inflation, online competitors and increased regulation and taxation – they were competing with cheap online retailers such as Temu.”
Changes to business rates
In the UK, there has been pressure on costs, both from an increase in employer National Insurance contributions and also business rates, where retail discounts have now been reduced.
Mr Gilbert added: “Tariffs have been introduced in a very short period of time, which means little can be done to mitigate them in the short term.
“Some retailers will be able to pass these costs onto their customers, but in low-value, high-volume businesses, with large competition, this is very difficult to do.”
Rising costs does not mean Amazon is not looking to expand elsewhere.
It announced that it planned to double the number of Prime subscription members in the UK with access to at least three of its grocery options, through its partnerships with Morrisons, Iceland, Co-op and Gopuff.
For many shoppers, having a point of human contact is still valued, as is brand loyalty.
Danni Hewson, head of financial analysis at AJ Bell, said: “Despite the striking till-less technology which always felt a little awkward for a post-pandemic shopper, customer numbers have nudged back.”
Vix Leyton, consumer expert at financial services firm thinkmoney, added: “The challenge was never just getting people through the virtual doors, but giving them a reason to stay. UK shoppers are fiercely habitual with their groceries.
“The irony is that Amazon’s strengths – speed, tech know-how, endless choice – didn’t translate into food shopping. In Britain, convenience was already sewn up by Tesco, Sainsbury’s and the discounters, and Ocado had long set the bar for online.
“Against that backdrop, Amazon Fresh felt like an extra rather than a necessity: the range was narrower, the prices weren’t disruptive, and the brand never quite shook off the sense of being a tech company dabbling in groceries.”
What can other companies learn from Amazon Fresh’s failure?
Mr Gilbert said the failure was a warning to other firms not to over-expand too quickly.
“Make sure you make sensible investment decisions, based on facts. As we live in a vulnerable world, assessing and mitigating risks are essential. Planning what-if scenarios to ensure survival can become critical.
“Managing cash flows on a daily and weekly basis also becomes essential. This will vary from business to business. However, in a cash-constrained market, unless there is a high probability of a quick payback, retailers are more likely to look to expand online and focus on marketing opportunities rather than planting lots of flags in different locations.”
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