A recent Bloomberg article about Amazon written by Matt Day, contained this paragraph:
“In the New York area the company is testing a new, fully automated facility in Bethpage, on Long Island. The warehouse, which will open later this year or early next year, relies on technology from AutoStore Holdings Ltd.”
Amazon continues to experiment with their grocery business after acquiring Whole Foods Market in 2017 for $13.7B. The challenge for Amazon is that the majority of Whole Foods customers shop at other grocery retailers because Whole Foods doesn’t sell popular branded CPG products like Coke, PepsiCo, Tide, etc. Every time a Whole Foods customer shops at another grocery retailer, it’s a lost sale at Whole Foods and Amazon.
In my opinion, the best grocery strategy Amazon can implement is launching stores that sell the products not currently found on the shelves at Whole Foods. Amazon believes launching Amazon Fresh stores, a brand very few consumers are aware of, is the right strategy. I vehemently disagree. I believe Amazon should launch ‘Whole Foods+’ stores to leverage the already popular Whole Foods brand name, and provide a shopping experience that keeps Whole Foods customers shopping within the Whole Foods and Amazon ecosystem.
Aside from stores, Amazon is exploring the use of micro fulfillment centers (MFC). An MFC is a 10,000 to 50,000 square feet facility that uses automation to fulfill online grocery orders. Amazon is in the process of testing an MFC solution from AutoStore™. Amazon can open hundreds and possibly 1,000 or more MFCs to fulfill online orders.
Note to Amazon: I recommend installing an AutoStore inside a cold room vs. using the multi-temp grid built into the AutoStore. (This is what H-E-B did and it’s a fabulous operation.) Pilot systems from Attabotics Inc. and Brightpick. Amazon should test the cold chain totes from Phononic Inc with AutoStore; it will save time and money and meet Amazon’s needs. An acquisition of the Ocado Group should be assessed. Tony Hoggett should NOT consider the MFC system from Dematic that Tesco is using. Instead, Tony should insist that Dematic design and install a better solution. Amazon isn’t Tesco.
On average, grocery retailers lose between $7 to $25 on every online order they manually pick and deliver. The challenge for retailers that install MFCs is improving unit economics. There are strategies that can be implemented to improve unit economics for groceries picked via automation.
It will take Amazon time to identify the optimal strategy using systems from Dematic, AutoStore™, Quicktron Robotics, Instock.com, Fulfil, etc. Amazon may choose to acquire AutoStore™ or another system for use in their MFCs.
Amazon should have acquired Alert Innovation like I suggested in 2020 but Walmart acquired the company and is installing the technology.
