Why Amazon Is Losing Faith In Its UK Fresh Markets

Despite an ambitious expansion of Amazon Fresh across the United Kingdom market, the number of onsite retail stores will apparently remain the same for now. According to The Sunday Times, Amazon has halted expansion plans beyond its 19 existing stores in the UK, cancelling new-location searches for a projected "hundreds" of additional outlets, per The Telegraph. Shoppers can expect only a trickling of new Amazon Fresh venues to open under already committed leases, via Winsight Grocery Business.

The high-tech, contact-free UK Amazon Fresh stores, concentrated primarily in London, gained popularity during the COVID-19 pandemic as shoppers valued the convenience of quick shopping sans the typical checkout process. It goes even further than self-checkout by bypassing the tills altogether, explains Amazon UK. The stores operate on what the company calls "Just Walk Out Technology" that tracks when an existing Amazon customer picks up items or returns them to shelves, collecting them in a cumulative virtual basket. There's nothing more for shoppers to do than walk out the door with their groceries. The customer's Amazon account automatically gets billed, generating an e-mailed receipt.

With ultra convenience, relatively low prices, in-store promotions, and daily lunchtime meal deals, the Amazon Fresh stores seemed a no-brainer for busy, technology-driven customers. But the expansion halt indicates some troubling trends.

All about the economics

From the anticipated 260 new UK Amazon Fresh stores by 2024, it's a substantial nosedive to zero. As noted by MarketingWeek, the massive Amazon brand had a giant lead due to vast resources, widespread brand recognition, and a proven track record with Amazon Fresh success in the United States. Putting a screeching halt to UK expansion now seems to be all about the economics.

In addition to lower UK Amazon Fresh sales than expected, the overall economic outlook remains grim amidst recession woes and food inflation, hitting customer pocketbooks in myriad ways, explains The Telegraph. Shoppers returning to retail stores find much higher grocery prices, leading many to cut down on spending across the board, including groceries. Amazon itself reported an overall 4% decrease in online sales for the second quarter of 2022.

Some analysts question whether the technological convenience of Amazon Fresh is enough to sustain its appeal over other established British supermarket brands such as Aldi and Tesco. Citing retail consultant Richard Hyman, founder of "Richard Talks Retail," MarketingWeek expresses little surprise over the UK Amazon Fresh reset. In Hyman's opinion, the crucial retail aspects of physical grocery shopping suffer from Amazon's laser focus on technology components.

Though Amazon is not currently moving forward with new UK Amazon Fresh stores, The Sunday Times, via The Telegraph, reports that the company plans to reconsider expansion plans in about 12 to 18 months.