Feliciano School of Business professor, Dr. Archana Kumar from the Department of Marketing recently spoke to the Asbury Park Press about Amazon pausing its Amazon Fresh expansion, focusing on why they may have made this decision, why the stores have fallen short and what makes grocery so tough for a company like Amazon.
Although Amazon has opened a few dozen stores across the country so far, they have decided to pause the rollout of the remaining planned store openings; Amazon is experimenting with the best format that appeals to customers and differentiates the stores in this competitive environment.
Given the very thin profit margins in the grocery sector, Dr. Kumar noted it is difficult to survive without “a strong competitive advantage.” “Unless you have a very unique selling proposition, it is very difficult to get a foothold.” She emphasized that the skip-the-line checkout technology may not be “a sustainable competitive advantage.” People will be curious to try it out but that is not enough to have them come back. Kumar said, “People when they go to grocery stores, they like that social interaction,” such as talking to a grocery clerk. She pointed out the success of Aldi which offers low price and no-frills shopping experience. Aldi’s success indicates that “there is room for new grocery stores but you need to have a strong competitive advantage,” Kumar said.