Amazon is shuttering its proprietary branded brick-and-mortar stores, redirecting its physical retail focus predominantly under the Whole Foods banner.
The shutdowns, which impact both Amazon Fresh and Amazon Go locations, were announced Tuesday and amount to roughly 70 sites across the United States. In a blog post, the company acknowledged that while performance in these stores was positive, they failed to establish “a truly unique customer experience with a viable economic model that was necessary for large-scale expansion.”
Consequently, certain locations will be converted into Whole Foods markets, with plans to launch an additional 100 new sites in the coming years. This includes an expansion of a new, smaller format dubbed Whole Foods Market Daily Shop.
“We are grateful to our employees for their many contributions over the years and are working, where possible, to help them transition to new roles within other Amazon businesses, including our extensive operations network,” the corporation stated.
Amazon indicated it is “testing new physical store concepts,” featuring a shop-in-shop arrangement in Illinois that merges Amazon Grocery offerings with Whole Foods Market. Furthermore, a massive 229,000-square-foot retail space, reminiscent of Walmart’s format, is under construction in a Chicago suburb.
However, according to Neil Saunders, Managing Director at GlobalData, the existing formats failed to give consumers a compelling reason to frequent them regularly. Saunders noted in a memo that Fresh was “too similar” to existing rivals, and the technology behind Go simply walking out the door was “not something that particularly excites shoppers.”
This marks the latest development in Amazon’s evolving grocery strategy, which has seen mixed levels of success. The company previously partnered with local grocers for delivery, but these efforts sometimes routed shoppers to separate online storefronts with distinct checkout processes and delivery fees, occasionally causing shopper confusion.
The company has also introduced its own private-label brands, such as Amazon Grocery and Amazon Saver, as a tactic to compete against the aggressive growth of discounters like Aldi and Lidl, and recently expanded same-day fresh grocery delivery to over 2,000 metropolitan areas.
Despite the closures of Fresh and Go stores, Saunders asserted that this does not signify a retreat from the grocery sector. He pointed out that the grocery business, now valued at $150 billion, boasts more than 150 million shoppers and “continues to command a significant share of the grocery market,” even when squaring off against market leader Walmart.
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