When Amazon introduced its cashierless checkout system—aptly called Just Walk Out—the tech was seen as the latest prong in Amazon's mission to transform brick-and-mortar stores and become a dominant competitor in the grocery industry.

Roughly seven years later, Amazon is taking that technology out of its grocery stores, and the revolution it had hoped to bring has yet to materialize.

Amazon says it is still committed to its grocery efforts—which these days include sales from Amazon.com, Amazon Fresh grocery stores, Amazon Go convenience stores and Whole Foods Market. But analysts are divided on how to interpret recent changes in Amazon's grocery strategy.

On top of removing the Just Walk Out technology from Fresh grocery stores, Amazon closed some stores, paused expansion for new locations and reformatted others. It laid off some workers in its grocery division, shelved its idea for drive-up pickup sites and experimented with a new subscription model for online shoppers.

Is Amazon's grocery business approaching its expiration date?

"In the world of nonperishable, nonedibles, Amazon is very dominant," said Sucharita Kodali, an analyst from Forrester who has followed Amazon's grocery efforts since they started. "In fresh foods, Amazon is not a significant player."

"If I were Kroger, I would not spend a lot of time focusing on Amazon as a competitive threat."

At the company's annual shareholders meeting last month, CEO Andy Jassy listed grocery as one of the many businesses Amazon is passionate about growing. Chief Financial Officer Brian Olsavsky told reporters earlier this year the company was "pleased" with its growth in physical stores.

"You'll see us continue to iterate in grocery because we believe when we find the right mix of offerings for customers, we can meaningfully improve their shopping experience," Tony Hoggett, Amazon senior vice president of worldwide grocery stores, said in a statement to The Seattle Times.

But the changes over the past several months have left many analysts and academics skeptical of how Amazon is going to succeed in a competitive, low-margin business—and some questioning how long the company should keep trying.

"As an observer who's watched the company for years, and knows the economics of the grocery industry, I can't say it makes sense," Kodali said. And Amazon's recent changes to its grocery business "suggest that they don't think it makes sense either."

From books to groceries

Amazon quietly entered the grocery business nearly two decades ago when it launched an online delivery service for nonperishable goods—with ambitions to expand to sell just about everything.

In an announcement on its website, according to a 2006 article from CNET, Amazon told its customers: "Because we only carry products when we can offer great prices and free shipping, we don't carry everything (yet!)"

Since then, Amazon has begun selling perishable goods online and introduced Go convenience stores, Fresh grocery stores and Fresh Pickup sites, where shoppers would pick up online orders. It closed the last of its two Fresh Pickup sites earlier this year.

In 2016, Amazon made a splash with the introduction of its Just Walk Out technology in a convenience store in Seattle's South Lake Union neighborhood. The tech relies on a complex system of cameras, sensors and computer vision to track items as customers shop and automatically charge them for what they walk out with, skipping the need for going through a checkout line.

In 2017, Amazon cemented its brick-and-mortar grocery presence when it acquired Whole Foods in a $13.7 billion deal.

Jake Dollarhide, an analyst and co-founder of Longbow Asset Management who has followed Amazon's grocery business closely, said the acquisition sent shock waves through the industry.

Amazon's stock went up and shares for Walmart, Costco and Kroger tumbled as investors and competitors prepared for the e-commerce giant to disrupt the traditional grocery retail market.

2024 The Seattle Times. Distributed by Tribune Content Agency, LLC.