In The Beginning
I joined Amazon in 2014. My first role was designing strategies for Amazon to become a 3PL. I have extensive supply chain and logistics experience. I then transferred into a team focused on designing fulfillment strategies for groceries. To ensure everyone at Amazon understood how passionate I am about the grocery business, I posted this article on LinkedIn in 2014. Few people read the article and those that did hated my recommendation that Amazon should acquire Whole Foods. I deleted the post a few months later.
In May of 2016, I reposted the article. The reception was completely different. The article generated a lot of interest inside and outside Amazon, because of my opinion that Amazon had to have physical grocery stores to thrive in groceries. In February 2017, a reporter from The New York Post read the article and contacted me. He asked me a myriad of questions related to grocery stores, robotics and the future of grocery retailing. This is the article that he wrote. I was quoted in the article. I shared my opinion on a few topics but I did not speak on behalf of Amazon.
Jeff Bezos disliked the article and he tried to minimize the perception that Amazon was going to replace people with robots. Although it was clear that I was a source for the article, and although the reporter publicly stated I was a source, Bezos sent this Tweet. I became known as the guy who made Jeff Bezos Tweet inside Amazon. I would have preferred to speak with Jeff, so that I could have pushed him to acquire Whole Foods and eventually Target; I believe Whole Foods Markets can be opened inside Target’s stores. Thinking Big and being passionate should be celebrated and embraced; not belittled. Bezos made a lot of people at Amazon (and elsewhere) angry with his Tweet, as everything in the article was actually being discussed by different team members at Amazon. For example, Amazon opened its first Amazon Go store in 2018. Why was Amazon Go created? To run stores using technology and eliminating the need for stores associates.
I left Amazon in 2017 to work as a consultant for Kroger. However, I have remained in close contact with different team members at Amazon. In fact, I work behind the scenes providing team members with strategies related to different topics at Amazon – especially groceries. Amazon executives and associates know they can contact me and ask me anything they want off the record and I’ll share my opinion. I never reveal the names of the individuals I speak with. Amazon hasn’t asked me to sign any agreements that prevent me from writing articles and posts, so I reserve the right to write about topics related to Amazon that I find interesting – like Amazon opening a supercenter.
Amazon Is At A Disadvantage
When compared to the leading retailers, Amazon is at a disadvantage for one reason – Amazon has too few stores. For example, Walmart operates 599 Sam’s Clubs and 4,606 stores in the USA and 5,414 stores internationally. Kroger operates 2,719 stores. Target operates 1,963 stores. Amazon operates less than 600 stores – see what I mean?
According to multiple sources I’ve spoken with at Amazon, the company has approved a project to open a supercenter. The store is expected to go live by Q3 or early Q4 in 2025. I am not sharing any of the designs for the supercenter, but I will share my own design which I provided to Amazon team members four years ago. The picture will be placed in the Comment section of the LinkedIn post when I share the article.
The challenge for Amazon is that it would be foolish for them to design and open supercenters that are similar to the 3,558 supercenters operated by Walmart. This is a great article about Walmart’s decision to open Supercenters. The average Walmart supercenter is 179,000 square feet and they can employ over 100 associates. Amazon’s proposed supercenter is over 200,000 square feet. A challenge for Amazon is that if they build supercenters, they will go up against established players (Walmart, Target, Costco) in entrenched markets who have extensive experience operating supercenters. Amazon will have to earn every customer and it won’t be easy.
My advice to Amazon is build a supercenter that combines Costco’s bulk buying business model with a traditional supermarket. The supercenter should fulfill and deliver groceries and food 24 hours a day and provide at-store pickup. It’s possible that Amazon will choose to install one or more AutoStore MFCs inside the supercenter to fulfil orders. The grocery retailer H.E.B. installed two AutoStore MFCs in some of their stores including an MFC inside a Cold Room. Amazon may choose to install a system from Fulfil, or install their own MFC technology. An Amazon supercenter shouldn’t be a clothing store – the focus should be on groceries, electronics, and prepared food. Customers shouldn’t feel like they’re inside a Walmart Supercenter.
This is the third time that Amazon has pursued opening a supercenter. Former Amazon CEO of Worldwide Consumer, Dave Clark, canceled similar projects in 2021 and 2022. I understand why Dave canceled the projects. Building a supercenter is a capital intensive and massive undertaking. I didn’t believe that Amazon was ready to take on such a project in 2021 or 2022.
I have more confidence in the team from Amazon leading the current supercenter project because Udit Madan, Vice President, Amazon Worldwide Operations, is a key member of the team. Tony Hoggett, SVP Worldwide Grocery Stores, is leading the project. I’m convinced that Udit will eventually take over the grocery business. I continue to stress to team members the need for Amazon to end the relationship with UNFI, and self-fulfill groceries to their stores and if built, supercenters. The way Amazon will generate increased grocery sales and value for customers is through in-store technology to maximize product at the shelf; robotics to minimize manual labor throughout the grocery ecosystem; advanced logistics facilities for grocery replenishment; and superior engagement with customers. Udit’s organization will play a large role.
Amazon must design supercenters that will generate excitement and pull customers from Walmart and other retailers. Based on what I’ve seen, I believe Amazon will be successful in building a supercenter. However, there is no way to estimate how many supercenters will be built in the coming years. Amazon must first prove they can succeed at building and operating one supercenter.
I support Amazon building a supercenter. However, I believe Amazon must also fix their issues at Whole Foods.
The Brutal Truth About Whole Foods
Amazon recently announced that they’re opening an automated micro fulfillment center inside a Whole Foods store located in Plymouth Meeting, PA. Amazon didn’t name the MFC vendor they selected, but I can confirm that Amazon has partnered with the company Fulfil. Amazon released this video announcing the use of micro fulfillment centers. In the video, you will see the same technology designed and operated by Fulfil. Amazon continues to pilot a micro-fulfillment system from the company AutoStore.
Amazon is piloting an MFC inside a Whole Foods store because 70% of the customers who shop at Whole Foods leave the store to finish their grocery shopping elsewhere – primarily at Walmart which is Amazon’s biggest competitor. Why do customers leave the store? Because Whole Foods won’t sell products with unnatural ingredients. Customers who want to buy Coke, Tide, Oreos and other products, must visit a grocery retailers that sells the brands they want.
Amazon’s plan is to install an MFC; store Coke, Tide, Oreos, etc., inside the MFC; and allow customers to place an order for the products stored in the MFC as they’re shopping for their favorite products at Whole Foods. When the customer checks out, they’ll receive a brown paper bag that contains the products they purchased from the MFC. Great care will be taken to make sure customers don’t see the products purchased from the MFC.
The system from Fulfil will cost $4.5M installed. I spoke with sources from Fulfil two days after the announcement and they stated to me that their goal is to reduce the cost of an installed system, “to between $2M to $3M.” Fulfil estimates that it will take, “up to one year” to get the system to operate as designed inside the Whole Foods store. Note: There are 519 Whole Foods stores. At $4.5M, it would cost Amazon $2.3B to install MFCs from Fulfil in every Whole Foods store. If Amazon installed MFCs from AutoStore, the average cost would be $7M installed or $3.6B total. Note: AutoStore MFCs are too big to be installed inside most Whole Foods stores. However, Amazon can open standalone MFCs powered by AutoStore.
Amazon’s Fulfillment, Technology and Robotics team, has created their own MFC system called an LVM for Local Vending Machine. The LVM operates in a HIVE fashion similar to the technology from Ocado. I predicted several months that Amazon would acquire the company Covariant to accelerate the design of several systems Amazon is building related to fulfillment – I was correct. Amazon acquired Covariant and their team is working on improving the picking arms on the LVM. Amazon is piloting the LVM in a few months. It will be possible at some point for Amazon to install LVMs for most if not all of their MFC needs.
The brutal truth is this: Amazon wouldn’t need to install MFCs inside Whole Foods stores if they did this one thing – name an Amazon executive to be CEO or co-CEO of Whole Foods, and change the business model so that popular CPG products like Tide, Coke, and Oreos are stocked and sold on the shelves inside each Whole Foods store. This can be done by removing 20% to 30% of the products inside Whole Foods and making those items available online. The best-selling CPG products would be added to the store assortment. Instead of showing leadership, Amazon has chosen a workaround.
I refer to what Amazon is doing as management by “See no evil. Hear no evil. Speak no evil.” Whole Foods CEO Jason Buechel, repeatedly states that, “Whole Foods will never sell products with unnatural ingredients.” Obviously that’s a lie. Customers will be able to buy products with unnatural ingredients from Whole Foods; the products will simply be stored inside an MFC located in a back room in the store. It’s an embarrassing charade and Andy Jassy is making a mistake by letting it happen. Amazon owns Whole Foods – it’s time for Amazon to act like it. One final comment – It’s a lie that Whole Foods customers are so sensitive that stocking CPG products will drive customers away. Less than 1% of customers would abandon Whole Foods.
Conclusion
Amazon has the potential to become the largest grocery retailer between 2030 and 2035. I used to think this would happen by 2027 but Amazon has moved at a glacial pace. To become the largest grocery retailer, however, Whole Foods isn’t enough. Supercenters aren’t enough. AmazonFresh isn’t the right store concept to scale. Amazon must do more.
In my opinion, Amazon should acquire the retailer Publix, and kill the AmazonFresh brand. Publix is an ESOP. Although more challenging due to ESOP rules and regulations, Amazon can acquire Publix. Note: I have encouraged the senior executives at Publix to consider being acquired by Amazon.
Amazon has partnered with the company Wiliot. Amazon should also partner with 345 Global or acquire the company as Wiliot and 345 Global work well together. Mark Edwards is the Founder and CEO of 345 Global. Walmart is a customer of Wiliot and 345 Global. According to sources at Kroger, they’re replacing five different software platforms with the platform from 345 Global. Amazon should immediately jump on this opportunity. Note: Instacart should have already acquired 345 Global. Big mistake, Instacart.
I strongly encourage Amazon to strengthen their partnership with Travis Kalanick’s company, City Storage Systems and CloudKitchens. Amazon must “own the porch and the kitchen” to maximize the sale of groceries and food to their customers. CloudKitchens is a great fit for Amazon’s business model.
As for Whole Foods…enough is enough. There are several executives that I can name who would do a great job of being the CEO of Whole Foods, and who have the ability to change the assortment of products sold in the stores with little to no disruption to Whole Foods culture, and driving increased sales. At the top of the list is Suzy Monford. Chris Nicholas, the CEO of Sam’s Club, would be a great choice to be CEO or lead Amazon’s grocery business.
Should Amazon open a supercenter? Yes they should.
I truly wish Amazon the best. I have tremendous respect for the executives and associates.
There are no easy days at Amazon.
