Amazon Overhauls Physical Grocery Strategy: Fresh & Go Stores Close Amid Whole Foods Expansion

Amazon is implementing a significant restructuring of its physical grocery operations, a strategic pivot that includes the closure of its Amazon Fresh and Amazon Go stores. This shift emphasizes the expansion of its Whole Foods Market brand, alongside an increased focus on grocery delivery services and the development of new physical store formats. The company's decision follows several years of exploring various physical retail concepts and re-evaluating their integration into its broader ecosystem.

This strategic pivot emphasizes the expansion of its Whole Foods Market brand, alongside an increased focus on grocery delivery services and the development of new physical store formats.

Store Closures and Strategic Shift

Amazon has initiated the closure of its physical Amazon Go and Amazon Fresh stores, including approximately 60 Fresh grocery stores across the United States. This move is part of an effort to reprioritize investments and refocus the company's physical grocery strategy. Some of the closed locations are planned for conversion into Whole Foods Market stores.

Following these closures, Whole Foods Market will become Amazon's sole remaining physical retail brand, building on previous decisions to shutter concepts such as brick-and-mortar bookstores and 4-Star shops. The Amazon Fresh online grocery service is set to continue operations.

Future Plans and Expansion

As part of its refined strategy, Amazon plans to expand its Whole Foods Market brand and grocery delivery services. The company intends to open over 100 new Whole Foods locations in the coming years.

Additionally, it will expand its line of Whole Foods Daily Shops, which are smaller markets designed to offer a limited selection of grocery items. Amazon also plans to introduce a new "mass physical store format." The company is increasing its focus on grocery fulfillment warehouses and expanding pickup options for everyday staples at select Whole Foods locations.

Background and Challenges of Amazon Fresh

The Amazon Fresh grocery chain was launched in 2020, following Amazon's acquisition of Whole Foods Market in 2017 for $13.7 billion. The Fresh concept aimed to provide more affordable groceries and highlight in-store technology. However, the chain experienced subsequent store closures and halted expansion efforts, including previous closures in the U.K. and Southern California.

Amazon acknowledged that it had not established "a truly distinctive customer experience with the right economic model" for Fresh.

Amazon acknowledged that it had not established "a truly distinctive customer experience with the right economic model" for Fresh. Challenges included a lack of a clear market identity, eclectic product assortments that sometimes featured items not typically associated with a grocery store, and issues with customer adoption of its in-store technology. Reports indicated that customers at Amazon Fresh stores sometimes inquired about products typically found at Whole Foods, suggesting potential brand confusion.

Technology Evolution

Amazon Go convenience marts, which debuted in 2018, utilized "Just Walk Out" technology, designed to allow shoppers to pick items and be automatically charged upon exit, eliminating traditional checkout lines. The Amazon Fresh concept also aimed to integrate technologies like Just Walk Out and smart shopping carts (Dash Carts).

In 2024, Amazon began moving away from using its cashierless technology in its own grocery stores. Data indicated that customers frequently bypassed Just Walk Out technology in Fresh stores, opting for traditional checkout methods, leading to its removal from these locations. Dash Carts also encountered user and training difficulties. Amazon is now focusing on selling its "Just Walk Out" software to other companies for use in various venues, including sports stadiums, concert halls, hospitals, and colleges.

Market Context and Integration Efforts

As of September, Numerator estimated that Walmart controlled approximately 21% of the U.S. grocery market, while Amazon and Whole Foods each held around 1.6%. Amazon has stated that Numerator's figures may underrepresent its total grocery market share.

Integration between Whole Foods and Amazon's broader ecosystem has presented challenges since the acquisition. Last year, Whole Foods CEO Jason Buechel was placed in charge of the entire Fresh grocery operation, initiating a "One Grocery" initiative with the goal of unifying the businesses.