In a recent Q&A with shareholders, CEO Andy Jassy discussed Amazon’s grocery business, and why he’s optimistic about its future:
I’m very bullish about grocery. I think some folks don’t realize how large a grocery business Amazon has today. If you look at our center of aisle things—so these are things like consumables, canned goods, pharmaceutical items, beauty products, really, everyday essentials—if I just exclude Whole Foods Market and Amazon Fresh, we did over $100 billion in gross sales in our grocery business on these items last year alone. So it’s a very significant business, and then I think we have a bunch of other areas that will allow us to grow in this area.
I’m excited about what I’m seeing with Whole Foods Market. It’s growing meaningfully faster than the grocery industry in general, with a really good profitability trajectory with the changes we’ve made over the last couple years and a great customer experience, and I’m also excited about the new smaller format and daily shop that we launched in New York City, where customers have really responded excellently to it, even better than we anticipated, so you could expect us to roll more of those out over time.
We know if we want to serve as many customers as we want, we need to have a broader, mass perishables offering. And we have several efforts here. We’ve been working on the second version of our physical Amazon Fresh stores, and those are showing meaningful progress in terms of what the performance looks like versus the first version of those Fresh stores. We’ve also been experimenting with a number of other concepts that we think have promise. These are things like at Whole Foods Market stores, where we have a store within a store, where we’re able to have items that maybe Whole Foods Market doesn’t supply, but that a lot of families want to shop when they do their weekly grocery shopping. Similar type of idea, being able to get some of those items in micro-fulfillment capabilities, on locations at certain Whole Foods Market stores. And then an offering that I would say we have seen some very early success on, that’s very promising, which is we have these same day facilities that we fulfill millions of SKUs out of for our retail business, typically same day.
And we have started adding a number of perishable items to some of the select same day facilities. We’ve experimented in Phoenix, in Kansas City, in Orlando at this point. And so now, when you’re getting those items that you get same day, you can add perishables, like eggs or milk, or bread, or yogurt. That experience is really resonating with customers. We’re seeing very significant adoption, and I’m optimistic as we roll that out to many more of our same day facilities, that that will lead to more of our customers buying perishables from us.
I think that the way people buy groceries is going to continue to evolve over time. So I continue to be very, very bullish on our grocery business. It’s large today and has a chance to be much larger in the future.