Marketplace Briefing: Why Amazon keeps opening and closing different grocery concepts
This is the latest installment of the Marketplace Briefing, a weekly Modern Retail+ column about the ever-changing e-commerce marketplace landscape. More from the series →
In 2012, Amazon founder Jeff Bezos was asked by TV interviewer Charlie Rose a question that would foreshadow the next stage in the e-commerce company’s retail ambitions: Would Amazon ever buy or open physical stores? At the time, Bezos struck a cautious note. Shoppers, he said, were already “well served” by traditional retailers, and Amazon had little interest in rolling out a “me-too product offering.”
“We want to do something that’s uniquely Amazon,” Bezos said. “If we can find that idea, and we haven’t found it yet, but if we can find that idea, we would love to open physical stores.”
Since then, Amazon has spent more than a decade investing in physical retail, particularly grocery — but the company has yet to find a store format that works.
On Tuesday, Amazon announced it will close its remaining Fresh and Go locations and convert some sites into Whole Foods Market stores. Currently, Amazon operates 14 Go convenience stores and 58 Amazon Fresh grocery stores, per the company website. At the same time, Amazon plans to focus on beefing up its online grocery delivery business, with a focus on same-day delivery and perishables, and expand the Whole Foods footprint with more than 100 new stores over the next few years.
“While we’ve seen encouraging signals in our Amazon-branded physical grocery stores, we haven’t yet created a truly distinctive customer experience with the right economic model needed for large-scale expansion,” the company wrote in a blog post.
This is far from Amazon’s first retreat from physical retail. Over the past several years, the company has shuttered a range of store concepts, including bookstores, apparel-focused shops and its “4-star” locations that showcased popular items from Amazon.com. As the company winds down its Go and Fresh formats, the move underscores how Amazon’s most ambitious physical retail experiments never found a sustainable footing.
Amazon, however, is not abandoning brick-and-mortar retail. The company says it plans to roll out a “mass physical store format,” though it has shared few details about the concept. Amazon has yet to name the new format, but plans call for a roughly 229,000-square-foot store in Orland Park, Illinois — its largest physical retail location to date — selling a mix of groceries and general merchandise, according to comments Amazon representatives made at a recent planning meeting.
Still, it remains to be seen if Amazon’s latest retail venture will pay off. Several analysts said Amazon’s previous struggles in physical retail have reflected a deeper mismatch between the company’s strengths and the realities of running stores. Amazon is widely regarded as best-in-class in e-commerce and logistics, but grocery depends on operational discipline, local merchandising and in-store execution. Many of Amazon’s store experiments, they said, leaned heavily on technology as a differentiator, without fully solving the fundamentals that drive repeat visits.
Errol Schweizer, a former Whole Foods vice president and author of the Checkout Grocery Update, said Amazon is excellent at e‑commerce and logistics but doesn’t know how to run stores. “They are No. 1 in e-commerce for a reason,” he said. “In terms of actual store experience and all the things that make stores successful, they just don’t get it. They don’t have the operations experience, they don’t have the skill sets, they don’t have the expertise.”
Jason Buechel, Amazon’s vp of Worldwide Grocery and Whole Foods CEO, told Modern Retail in December that experimentation is critical to Amazon’s physical retail strategy. He said one of the company’s core goals when rolling out new grocery concepts is “making sure that we are learning and understanding from the customer side,” adding that while Amazon may be “in very early innings,” the company is already thinking about “the evolution of that concept, or even new concepts that we might bring forth.”
Tech-heavy stores
Many of Amazon’s physical retail bets have leaned heavily on technology as a differentiator, including cashierless checkout, smart carts and biometric payments. But analysts say that focus often came at the expense of basics like store layout, pricing clarity, staffing and assortment.
“Amazon believed if they created a technologically advanced store, consumers would shop there,” according to Brittain Ladd, a supply chain consultant who worked at Amazon from 2014 to 2017. “But that’s not why consumers go to a grocery store. They go to a grocery store because they like the format, they like the assortment, they like the value, and they like the prices.”
Because Amazon’s cashierless Go stores leaned so heavily on technology, they often felt “sterile” and “like walking into a warehouse,” Ladd said.
That tech-first approach may help explain another recent retreat: Amazon’s decision to shut down Amazon One, its palm-scanning authentication service.
Amazon said it will discontinue Amazon One’s biometric authentication services for retail businesses on June 3, 2026, according to a notice posted on the company’s Amazon One website. The service, which allowed shoppers to enter stores or pay by scanning their palm, was used across Amazon’s grocery footprint, including Amazon Go, Amazon Go Grocery and Whole Foods Market, as well as at some third-party venues.
“In response to limited customer adoption, we’re discontinuing Amazon One, our authentication service for facility access and payment,” an Amazon spokesperson told Modern Retail in a statement.
Amazon’s decision to discontinue Amazon One was made separately from other businesses, according to the company. Still, Amazon One was closely linked to the company’s grocery business, particularly its cashierless retail strategy, which Amazon has scaled back in recent years. Amazon One was first introduced as part of the technology behind Amazon Go cashierless stores in 2020, which used cameras and sensors to track shoppers and automatically charge them for their purchases.
Stiff competition
Those pullbacks come as Amazon faces a far more basic challenge in grocery, analysts said. Sucharita Kodali, a principal analyst at Forrester, said the U.S. grocery market is “incredibly competitive” and intensely local. Shoppers have no shortage of options and a strong desire to see and touch perishables, making it very hard for Amazon to gain share. Indeed, although Amazon operates more than 550 Whole Foods stores across the country, Walmart alone boasts over 4,600 stores in the U.S., not including Sam’s Club locations.
To win meaningful share, Amazon needs to build stores compelling enough to pull shoppers away from established grocers like H-E-B, Kroger and Walmart. But it has yet to deliver that “best store ever” experience, Ladd said, adding that Amazon remains “one of the smallest grocery retailers in the U.S.” when measured by physical footprint.
Despite Amazon’s grocery investments, the company still captures only a sliver of overall U.S. grocery spending, according to data from Numerator, which counts food and beverage sales but not alcohol and nonfood items. As of September, Walmart claims 21% of overall grocery spending, while Kroger captures 8.5%. Amazon and Whole Foods, on the other hand, each have 1.6% of the market. Amazon says Numerator’s data underrepresents Amazon in the grocery space because it does not include non-food CPG products, which are commonly ordered through its e-commerce site.
Amazon says it is one of the top three grocers in the U.S., with over $50 billion in gross sales. Since the 2017 acquisition, Whole Foods has seen over 40% sales growth.
Amazon’s physical retail strategy is once again in flux, but analysts at Wedbush Securities called the Fresh and Go closures “an important step forward in Amazon’s broader strategy” in a Jan. 27 research note. Amazon’s pivot “will allow the company to focus on expanding its Whole Foods Market brand” and “bolster the company’s same-day efforts, adding even more value to Prime memberships.”
What I’m reading
- Amazon announced that it is laying off about 16,000 corporate workers in its latest cost-cutting push.
- Amazon mistakenly sent a calendar invite referencing upcoming job cuts to some employees, per Business Insider.
- OpenAI is seeking premium pricing for its initial ChatGPT ads rollout, according to The Information.