Amazon is undertaking a significant restructuring of its physical grocery operations, opting to shutter its branded Amazon Fresh and Amazon Go stores. The move was disclosed publicly on Tuesday, revealing that about 70 of these locations across the United States will cease operations or be converted. This decision is part of the companys broader strategy to consolidate its brick-and-mortar grocery presence under the Whole Foods Market brand, which it acquired in 2017.
In a recent blog post, Amazon acknowledged that while the Amazon Fresh and Amazon Go outlets exhibited some encouraging customer engagement, the stores ultimately did not deliver a unique and compelling shopping experience coupled with an economic model conducive to scalable growth. The company indicated that this lack of a sufficiently distinctive value proposition made large-scale expansion of these concepts untenable.
Some of the shuttered Amazon Fresh and Go locations are slated for transformation into Whole Foods Market stores as part of an expansion strategy that includes the opening of an additional 100 Whole Foods locations over the next several years. This growth plan will notably feature an emerging offshoot - the Whole Foods Market Daily Shop - which focuses on smaller, convenience-oriented stores offering a curated selection of grocery items.
Amazon expressed gratitude to the teams who contributed to the Fresh and Go concepts over the years and emphasized efforts to redeploy impacted employees within the company. These efforts include exploring opportunities across Amazons extensive operational network to facilitate personnel transition during the reorganization.
In parallel with these changes, Amazon is actively exploring new physical retail formats designed to merge digital convenience with physical store advantages. A notable example under development is a store-within-a-store located in Illinois, combining elements from Amazon Grocery and Whole Foods Market to create an integrated shopping experience. Additionally, in a Chicago suburb, Amazon is constructing a substantial 229,000-square-foot retail facility intended to operate as a hybrid model comparable in scale to Walmart.
Industry analysts have pointed out challenges faced by Amazon Fresh and Amazon Go in attracting and retaining shoppers. Neil Saunders, managing director at GlobalData, observed that Amazon Fresh did not sufficiently differentiate itself from other grocery competitors, diminishing its attractiveness to consumers. Regarding Amazon Go, the signature just-walk-out technology, while innovative, has not proven to be a decisive factor driving customer visits or loyalty, according to Saunders.
These developments mark the latest phase in Amazons evolving approach to grocery retail, a sector where it has experimented with multiple formats and service offerings. The company has forged partnerships with local grocery chains to broaden delivery capabilities, although the experience was sometimes fragmented due to separate checkouts and delivery fees, leading to shopper confusion. Amazon has also invested heavily in private label brands, such as Amazon Grocery and Amazon Saver, aiming to compete aggressively against low-cost grocery chains like Aldi and Lidl.
Complementing these initiatives, Amazon recently expanded same-day fresh food delivery services to over 2,000 cities, demonstrating its commitment to growing its online grocery presence. Despite the closure of Amazon Fresh and Go stores, analysts caution against interpreting this as a failure in Amazons grocery ambitions. Saunders highlighted that Amazons grocery business has reached approximately $150 billion in annual revenue and serves over 150 million customers. This scale evidences Amazons continued success in capturing market share within the grocery sector, including in competition with Walmart, the established market leader.
As Amazon pivots its brick-and-mortar focus to Whole Foods and tests innovative retail concepts, its broader grocery business appears poised to maintain momentum in both physical and digital channels, leveraging its extensive reach and operational capabilities.