Amazon Fresh pause on new stores: Long Island impact unclear

Amazon is putting the brakes on opening new Amazon Fresh supermarkets to examine “the economic value” of the concept, so the status of the Long Island spaces the company spent millions of dollars renovating for two stores is unclear.

The Seattle-based e-commerce giant won’t say how it will proceed with spaces that have been renovated for planned Amazon Fresh supermarkets, or whether any of the currently open stores will close.

Meanwhile, new light green and gray paint and large glass windows — the signature look for Amazon Fresh — are on nameless storefronts in East Setauket (4054 Nesconset Hwy.) and Plainview (50 Manetto Hill Rd.) that Amazon has leased in shopping centers. What’s inside the locked, renovated spaces is obscured by window coverings.

The Amazon Fresh in Oceanside, opened in July, is the only one in New York State.

Launched in Woodland Hills, California, in 2020, the Amazon Fresh model leans heavily on “Just Walk Out” technology that allows shoppers to pay digitally without going through checkout lanes.

There are now 44 Amazon Fresh stores in eight states and Washington, D.C., according to its website.

Amazon, which bought the Whole Foods Market chain in 2017, launched Amazon Fresh to attract customers who wanted a more traditional grocery selection instead of high-end Whole Foods’ organic and natural offerings. But Amazon, which had a net loss of $2.7 billion in 2022, is cutting costs and trying to boost profitability companywide.

On Feb. 2, Amazon CEO and president Andrew Jassy told analysts during an earnings call that the company was pausing the opening of new Amazon Fresh stores while it experiments to try to find a format that resonates with customers.

“We’ve … decided over the last year or so that we’re not going to expand the physical [Amazon] Fresh doors until we have that equation with differentiation and economic value that we like, but we’re optimistic that we’re going to find that in 2023. We’re working hard at it,” he said.

Amazon recorded a $720 million charge in the fourth quarter on property, equipment and operating leases, primarily related to its Amazon Fresh and Amazon Go physical stores, chief financial officer Brian Olsavsky told analysts.

The company has decided to exit some stores with low-growth potential, he said.

Amazon is in a major cost-cutting mode — the company announced more than 18,000 job cuts in January — after over-investing in expansion since the start of the COVID-19 pandemic, said Sarah Wyeth, retail sector lead at S&P Global Ratings, a Manhattan-based financial analysis company.

“They literally doubled their fulfillment network in around two years,” she said.

Having a strong grocery business is important to Amazon, which has the high-end segment covered with Whole Foods, but it's still trying to figure out the mass-market segment, she said.

Permits move forward

Local officials said Amazon has not indicated when it will open the two Amazon Fresh supermarkets, but county and town building-related approvals have moved forward recently.

On Tuesday, the Nassau County Department of Public Works approved grease traps for the Amazon Fresh planned for Plainview, allowing the Town of Oyster Bay to issue a certificate of occupancy for the store Wednesday.

“A certificate of occupancy has no expiration date and it remains in effect for as long as the tenancy exists, provided that there are no changes or deviations to their approved plans,” town spokesman Brian Nevin said.

The town approved the fire sprinklers for the project Jan. 25 and plumbing and gas fixtures on Monday, he said.

The Town of Brookhaven issued a certificate of occupancy for the East Setauket store on Nov. 2, town spokesman Jack Krieger said.

The owners of the two Long Island shopping centers did not provide any clarity this week on the prospects of the stores opening at Suffolk Plaza in East Setauket and Manetto Hill Plaza in Plainview.

'Not game-changer' for food

Amazon Fresh stores are struggling for several reasons: The merchandising is confusing; the store operations, including customer service, are subpar; and the quality of perishable foods ranges from average to slightly above average, said Jeff Metzger, publisher of Food Trade News in Columbia, Maryland.

“They are a failure … ‘Just Walk Out’ technology is not a game-changer for people who are buying food,” he said.

The renovated, unopened spaces in Plainview and East Setauket are among several from Virginia to New Jersey that have the capacity to open within two weeks as Amazon Fresh stores, but they won’t be, Metzger said.

“And in my opinion, those stores are never going to open,” he said.

Amazon has a reputation for being a trailblazing disrupter in retail, but since Jassy was promoted to CEO and president in 2021, the bar has been raised for profitability, said Garry Church, senior vice president of enterprise strategy and development at Inmar Intelligence, a retail industry analytics company in Winston-Salem, North Carolina.

Amazon has always prioritized convenience and speed of product delivery for its customers, but what it lacks is a priority on offering savings, he said.

“I don’t know how you get the math to work on creating savings and being a low-cost provider and having convenience … during these times of high cost and high inflation,” he said.

By Tory N. Parrish

tory.parrish@newsday.comToryParrish1

Tory N. Parrish covers retail and small business for Newsday. She has worked at the Pittsburgh Tribune-Review and Observer-Dispatch in Utica, N.Y.