Workers stock shelves at an Amazon Fresh grocery store in Seattle, Washington, US, on Thursday, May 2, 2024.
David Ryder | Bloomberg | Getty Images
On a humid afternoon in August, a few hundred shoppers lined up outside an Amazon Fresh supermarket in a Philadelphia suburb, eagerly awaiting the store’s grand opening. A person in a banana costume hyped up the crowd, while Amazon staffers handed out free samples of cold brew coffee.
The event was a long time coming. Since 2022, the Fresh store in Bensalem, Pennsylvania, looked ready to open. But month after month, it sat vacant, with Amazon’s familiar smile logo plastered on a sign overlooking an empty parking lot.
“I kept thinking it would open, but it didn’t,” Joe Knowles, Bensalem Township’s council president, told CNBC. “All of a sudden, bang, it was ready to go.”
The Bensalem store is one of a handful of new Fresh locations that Amazon has launched in recent months, the first new store openings since the company halted expansion of the franchise more than a year ago. Since June, Amazon has opened seven other stores in California, Illinois, Maryland, New Jersey and Virginia, with more locations expected this year and into next. The company said it’s also launching five redesigned stores in Illinois and California this week.
It’s the latest development in Amazon’s on-again, off-again effort to become a powerhouse in a market the company has been pursuing for 17 years, culminating with its $13.7 billion acquisition of Whole Foods in 2017, the company’s biggest deal ever. Amazon’s scattershot approach has at times been about expanding its “everything store” mission and at others has been focused on making high-end produce more affordable. In some cases, the markets have provided a testing ground for in-store technologies.
Through it all, Amazon in 2023 claimed just 1.4% of the U.S. grocery market, compared compared with Walmart at 23.6% and Kroger’s 10% share, according to Numerator data.
Fresh supermarkets are a piece of the portfolio, which also includes Go convenience stores and same-day delivery for Prime members. The company also launched an unlimited grocery delivery subscription in the U.S. earlier this year. On Tuesday, Amazon introduced a new grocery private label called Amazon Saver, which includes items like pancake syrup, deli meat and canned goods mostly priced under $5.
The Fresh chain made its debut during the early months of the Covid pandemic. Amazon opened the first such store in September 2020, in the Woodland Hills neighborhood of Los Angeles, with an eye toward offering cheaper prices than Whole Foods. The company added package drop-off counters, along with cashierless checkout lanes and voice-activated displays, allowing shoppers to ask Alexa for recipe ideas or help finding items.
Amazon would reach 46 Fresh locations worldwide by early 2022. But the expansion plans ran head first into CEO Andy Jassy’s efforts to rein in costs as rapidly changing macro conditions forced dramatic downsizing. Amazon instituted mass layoffs starting in 2022, and shuttered some of its newer, more unproven bets.
In February 2023, Jassy announced on a quarterly earnings call that Amazon planned to close some Fresh supermarkets and Go convenience stores. He also hit pause on further growth of its Fresh footprint until the company could identify a store format that resonated with shoppers and “where we like the economics,” Jassy said.
Krispy Kreme donuts
With headcount cuts largely in the rearview mirror, Amazon is back into investing mode and pouring resources into Fresh, opening new stores after refining the experience and testing out a redesigned format late last year in select California and Illinois locations. Jassy and Amazon Fresh leaders have acknowledged that in order to grow its already “very large” grocery business, the company needs a bigger brick-and-mortar footprint.
In 2022, just 11% of sales in the $1.6 trillion U.S. grocery market took place online. That’s far below the level of e-commerce penetration in other categories, such as consumer electronics, where 41% of purchases were made online, according to Jefferies data. Companies “need to have a physical presence to be big in grocery,” analysts from the bank wrote in a note in October.
As part of the Fresh store redesign, Amazon created a more colorful layout and added Krispy Kreme donut and coffee stalls. In April, the company said it would remove the cashierless checkout technology, called Just Walk Out, from its U.S. Fresh stores and Whole Foods markets in favor of computerized Dash Carts, which track and tally up items as customers shop.
Amazon told CNBC it’s seen increased purchasing and higher customer satisfaction scores at the redesigned locations. The company said it expects to selectively open new Fresh locations over time based on feedback from shoppers.
“We like the early results a lot,” Jassy said on the company’s first-quarter earnings call in April, referring to the revamped Fresh stores. “They’re really meaningfully better in almost every dimension. It’s still early, and there’s some things to work through, but we like what we’re seeing there.”
A woman uses a dash cart during her grocery-shopping at a Whole Foods store as Amazon launches smart shopping carts at Whole Foods stores in San Mateo, California, United States on February 25, 2024. The smart shopping cart makes grocery shopping quicker by allowing customers to scan products right into their cart as they shop and then skip the checkout line.
Tayfun Coskun | Anadolu | Getty Images
Still, at least 22 Fresh supermarkets across the country remain vacant or unopened even though construction is complete, according to interviews with city officials and local news reports.
Delayed openings or cancellations have triggered at least five lawsuits. Landlords in Pennsylvania, New Jersey, New York, Florida and Washington alleged the company breached its contract by terminating its lease, with some parties seeking tens of millions of dollars worth of damages. Amazon last year reached a settlement with property owners in Florida and Washington, according to court documents. Attorneys representing the property owners didn’t respond to requests for comment.
Amazon declined to comment on the status of the Fresh stores that remain unopened.
One store in limbo is in Rancho Mirage, California, a desert town about 30 minutes southeast of Palm Springs. Previously the location of a Stein Mart department store, the market is in a shopping center that also includes a Hobby Lobby, an Italian restaurant and a blood bank. Shoppers in the area can find a Whole Foods, Walmart, Trader Joe’s and Aldi all within a short drive.
Amazon began remodeling the store in 2021 and signage went up the following year. But “opening soon” signs are still plastered on the doors. The company has told Rancho Mirage officials and AlbaneseCormier, the owner of the shopping complex, that it expects the store to open in 2025, said Ted Weill, a city council member.
AlbaneseCormier didn’t respond to a request for comment.
Weill said there aren’t many companies that can afford to just let a building sit idle for years.
“Amazon has so much money that whether they’ve invested $10 million, $20 million, $30 million in the project and decide not to go forward, so be it,” Weill said. “That won’t be the criteria that holds them back from pulling out.”
More than 500 miles north of Rancho Mirage, in the Sacramento suburb of Roseville, Amazon recently opened the doors of a Fresh supermarket. The store was fully constructed by last summer.
Brent Thill, an analyst at Jefferies, took the two-hour drive to Roseville from the Bay Area with his 16-year-old son a week after the Fresh store opened last month. Thill said the supermarket had an “amazing” selection, though he described the overall vibe as “sterile.”
“You walk into the Amazon Fresh store in Roseville and it feels like you’re in a stainless steel wine cellar,” Thill said. “And the store doesn’t have any decorations, it’s just a giant building.”
Thill has a buy rating on Amazon stock, but he says in grocery the company is spending a lot of money to compete in “one of the lowest-margin businesses on the planet.” But he called it “one of the highest budget items in the pocketbook,” which is where it clearly fits into Amazon’s broader retail strategy.
“And if there’s synergies around Amazon returns, if they can make it more unique, then who knows which way it goes,” Thill said.
Amazon on Friday announced it would invest an additional $4 billion in Anthropic, the artificial intelligence startup founded by ex-OpenAI research executives.
The new funding brings the tech giant’s total investment to $8 billion, though Amazon will retain its position as a minority investor, according to Anthropic, the San Francisco-based company behind the Claude chatbot and AI model.
Amazon Web Services will also become Anthropic’s “primary cloud and training partner,” according to a blog post. From now on, Anthropic will use AWS Trainium and Inferentia chips to train and deploy its largest AI models.
Anthropic is the company behind Claude — one of the chatbots that, like OpenAI’s ChatGPT and Google’s Gemini, has exploded in popularity. Startups like Anthropic and OpenAI, alongside tech giants such as Google, Amazon, Microsoft and Meta, are all part of a generative AI arms race to ensure they don’t fall behind in a market predicted to top $1 trillion in revenue within a decade. Some, like Microsoft and Amazon, are backing generative AI startups with hefty investments as well as working on in-house generative AI.
The partnership announced Friday will also allow AWS customers “early access” to an Anthropic feature: the ability for an AWS customer to do fine-tuning with their own data on Anthropic’s Claude. It’s a unique benefit for AWS customers, according to a company blog post.
In March, Amazon’s $2.75 billion investment in Anthropic was the company’s largest outside investment in its three-decade history. The companies announced an initial $1.25 billion investment in September 2023.
Amazon does not have a seat on Anthropic’s board.
News of Amazon’s additional investment comes one month after Anthropic announced a significant milestone for the company: AI agents that can use a computer to complete complex tasks like a human would.
Anthropic’s new Computer Use capability, part of its two newest AI models, allows its tech to interpret what’s on a computer screen, select buttons, enter text, navigate websites and execute tasks through any software and real-time internet browsing.
The tool can “use computers in basically the same way that we do,” Jared Kaplan, Anthropic’s chief science officer, told CNBC in an interview last month, adding it can do tasks with “tens or even hundreds of steps.”
Amazon had early access to the tool, Anthropic told CNBC at the time, and early customers and beta testers included Asana, Canva and Notion. The company had been working on the tool since early this year, according to Kaplan.
In September, Anthropic rolled out Claude Enterprise, its biggest new product since its chatbot’s debut, designed for businesses looking to integrate Anthropic’s AI. In June, the company debuted its more powerful AI model, Claude 3.5 Sonnet, and in May, it rolled out its “Team” plan for smaller businesses.
Last year, Google committed to invest $2 billion in Anthropic, after previously confirming it had taken a 10% stake in the startup alongside a large cloud contract between the two companies.
LONDON — Apple and Google could face a competition investigation into their dominance of mobile web browsers and apps in the U.K.
The U.K.’s Competition and Markets Authority issued a report Friday with a provisional decision from an independent inquiry group tasked by the regulator with carrying out an in-depth review of the mobile browser markets.
In the report, the group recommended that the CMA investigates Apple and Google’s activities in mobile ecosystems under the new Digital Markets, Competition and Consumers Act (DMCC), a new U.K. law coming into force next year which seeks to prevent anti-competitive behavior in digital markets.
The DMCC is akin to the Digital Markets Act in the European Union. It gives the CMA the ability to designate firms as having “Strategic Market Status” (SMS) — which means they have a significant amount of market power in a certain digital business.
Under the rules, the CMA can impose major behavioral changes on firms that have SMS status, including ending “self-preferencing” of their own services, requiring interoperability — essentially allowing one piece of software to work with another smoothly — and banning anti-competitive behavior.
The CMA is required to undertake a formal investigation to give a firm SMS status.
For Apple specifically, the CMA inquiry group said it was concerned the tech giant’s App Store rules “restrict other competitors from being able to deliver new, innovative features that could benefit consumers” — for example, faster webpage loading on iPhone apps.
It added many smaller U.K. developers said they would like to use “progressive” web apps — which allow firms to offer apps outside of an app store — but that this technology “is not able to fully take off on iOS devices.”
The group also said it found a revenue-sharing agreement between Google and Apple to make Google the default search engine on iPhone “significantly reduces their financial incentives to compete in mobile browsers on iOS.”
“Markets work best when rival businesses are able to develop and bring innovative options to consumers,” Margot Daly, chair of the CMA’s independent inquiry group, said in a statement, adding that “competition between different mobile browsers is not working well and this is holding back innovation in the U.K.”
Apple said in a statement that it disagreed with the findings of the report and that it was concerned market interventions imposed under the DMCC “would undermine user privacy and hinder our ability to make the kind of technology that sets Apple apart.”
“Apple believes in thriving and dynamic markets where innovation can flourish. We face competition in every segment and jurisdiction where we operate, and our focus is always the trust of our users” an Apple spokesperson told CNBC via email.
Google was not immediately available for comment when contacted by CNBC.
The CMA group had also looked into restrictions on the distribution of gaming services on Apple’s mobile app distribution platform. However, it’s now decided to drop this element of the investigation following a decision by the U.S. tech giant to allow cloud gaming services on App Store.
The regulator said interested parties have until Dec. 13 to share comments on its provisional findings. It expects to make a final decision in March 2025.
An iPhone 16 signage is seen on the window at the Fifth Avenue Apple Store on new products launch day on September 20, 2024 in New York City.
Michael M. Santiago | Getty Images News | Getty Images
The Indonesian government expects Apple to increase its proposed $100 million investment into the country, according to state media, as the iPhone maker seeks clearance from Jakarta to sell its latest phones.
The American tech giant’s latest smartphone model doesn’t meet Indonesia’s 40% domestic content requirements for smartphones and tablets and hasn’t been granted clearance to be sold in the country.
The purpose of the ban is to protect local industry and jobs, with officials asking Apple to increase its investments and commitments to the economy in order to gain greater access.
According to a report from Indonesian state media, the country’s Ministry of Industry met with representatives from Apple on Thursday regarding its proposal to invest $100 million over two years.
The funds would go toward a research and development center program and professional development academy in the country, as per the report.
The company also plans to produce accessory product components, specifically mesh for Apple’s AirPods Max, starting in July 2025, it added.
Apple didn’t immediately respond to a request for comment from CNBC.
While the new offer is 10 times larger than a proposal that was reported earlier, the government is still striving to sweeten the deal to get a “fair” commitment.
“From the government’s perspective, of course, we want this investment to be larger,” industry ministry spokesperson Febri Hendri Antoni Arif told state media on Thursday.
He said that a larger investment would help the development of Indonesia’s manufacturing sector, adding that its domestic industry was capable of supporting production of Apple devices such as chargers and accessories.
While Indonesia represents a small market for Apple, it also offers growth opportunities as it has the world’s fourth-largest population, according to Le Xuan Chiew, a Canalys analyst focusing on Apple strategy research.
“Its young, tech-savvy population with growing digital literacy aligns with Apple’s strategy to expand [global sales],” he said, noting that it also offers potential for manufacturing and assembly that supports Apple’s efforts to diversify its supply chain.
Success in this market requires a long-term approach, and Apple’s investment offer demonstrates a commitment to complying with local regulations and paving the way for future growth, he added.