Amazon Says It Profits as Brick-and-Mortar Stores Lock Up Products to Curb Theft

Workers at the Amazon pharmacy fulfillment center in Corona, Calif., on May 29, 2024. Amazon

Amazon CEO Andy Jassy said that the company’s online pharmacy business has gained customers who are frustrated by locked-up products in physical drug stores, a measure many retailers have taken to prevent theft.

Jassy made the remarks on an earnings call with investors and reporters on Aug. 1 after the e-commerce giant released its second-quarter results, which showed a boost in profits but a miss in its revenue estimates.

When discussing future earnings prospects, Jassy highlighted his belief that Amazon’s focus on making the online shopping experience smoother would translate into strong growth for the company’s online pharmacy business.

“On the pharmacy side, I think you’re right that you’re seeing that business continue to grow and to get more resonance with customers,” he said, adding that customers “love the customer experience of Amazon Pharmacy.”

Jassy then drew a comparison between “the experience and the speed and ease” with which customers can order at Amazon’s online pharmacy compared to walking into a physical drug store.

“If you walk into pharmacies in cities today, it’s a pretty tough experience with how much is locked behind cabinets, where you have to press a button to get somebody to come out and open the cabinets for you and a lot of shoplifting going on in the stores,” he said. “So, the combination of what’s happening in the physical world and how much improved we’ve made our pharmacy experience is driving a lot of customer resonance and buying behavior.”

The rise in certain types of crime, especially retail theft, in urban areas has forced some pharmacy chains to bolster security and take measures like locking up products.

Retail crime, violence, and theft have been impacting the retail industry at “unprecedented” levels, according to the National Retail Federation (NRF). The group’s latest report on retail security showed that retailers have seen a dramatic jump in financial losses associated with theft, totaling $112.1 billion in 2022.

“Retailers are seeing unprecedented levels of theft coupled with rampant crime in their stores, and the situation is only becoming more dire,” said Dave Johnston, National Retail Federation vice president for asset protection and retail operations, in a statement. “Far beyond the financial impact of these crimes, the violence and concerns over safety continue to be the priority for all retailers, regardless of size or category.”

Retail crime led nearly 30 percent of retailers to reduce or alter in-store selection, including by locking up products, according to the NFR. Another 28.1 percent closed a specific store location while a whopping 45.3 percent reduced store operating hours to mitigate the risk.

Making products less accessible to customers, limiting hours of operation, or closing certain stores outright all have an impact on sales, which online retailers are well-poised to pick up.