In November 2015, an intrepid GeekWire photographer attached a camera to a pole in an attempt to get a look inside Amazon’s first bookstore before it opened. OK, so maybe we went a little overboard, in hindsight, but it was a sign of just how significant the moment felt.
The world’s biggest online retailer was finally opening a store in the real world.
But in the ensuing decade, we’ve gone from peeking through the windows to watching the doors close on Amazon’s homegrown physical retail brands.
The news Tuesday that Amazon will shutter all 57 Amazon Fresh stores and 15 remaining Amazon Go locations isn’t just the end of Amazon-branded grocery stores. It’s a full-circle moment for a vision that dates back to Jeff Bezos’ heyday at the help of the company.
Amazon says it will keep experimenting with new physical store concepts. And the Just Walk Out technology born in Amazon Go — a system of cameras and sensors that tracks what shoppers pick up and charges them automatically — will survive as a licensing business, now installed in more than 360 third-party locations including stadiums and airports.
But as a physical retailer in its own right, the company’s peculiar brand of innovation has yet to produce a formula that sticks.
The bookstores closed in 2022, along with the Amazon 4-star and Pop Up stores. The Amazon Style clothing stores followed in 2023. Now, Amazon Go and Fresh will soon be gone. What’s left is Whole Foods, a 45-year-old chain that Amazon acquired in 2017, not one it invented.
Amazon emphasizes a bias for action and calculated risk-taking in its leadership principles, and the company has never shied away from killing projects that don’t work. But as much as anything it has ever tried to do, Amazon’s physical retail initiatives have tested those values.
Efficiency vs. experience
Brittain Ladd, a supply chain consultant who worked at Amazon from 2014 to 2017, said he believes the core issue is that Amazon’s retail culture is built around efficiency and technology, not real-world customer experience. The company specializes in optimizing logistics and building systems, not in creating the kind of warm, inviting environments that draw shoppers into physical stores.
“What customers wanted was value, an experience, and quality,” Ladd said via phone Tuesday afternoon, expanding on his earlier comments on LinkedIn. “You walk into an Amazon Go store and it’s like, OK, I get it — this is what happens when the world ends and only robots are left.”
Others see a strategic shift, not a failure.
Amazon is betting the future of its Amazon Fresh brand on delivery, not stores. Same-day delivery of perishables — milk, eggs, produce — is now available in more than 2,300 U.S. cities, integrated into the same shopping cart as electronics and household goods.
Jason Goldberg, chief commerce strategy officer at Publicis, pointed to that progress as evidence that Amazon is simply winning grocery a different way.
“Don’t assume this means they are giving up Grocery,” Goldberg wrote on LinkedIn. “What has changed is that Amazon has figured out how to win Everyday Essentials and Perishables through same-day delivery from climate-controlled zones in fulfillment centers.”
In an internal memo to employees Tuesday, Jason Buechel, the Amazon Worldwide Grocery Stores VP and Whole Foods CEO, thanked the people who built and ran the Amazon Go and Amazon Fresh stores, calling them pioneers.
“Although we’re closing these stores, the impact of your work will shape our next generation of store concepts and customer experiences,” he wrote in the memo, obtained by GeekWire.
The delivery bet
Wall Street seemed unfazed by the store closures. Wedbush Securities called them “an important step forward in Amazon’s broader strategy,” noting that Amazon has struggled to displace incumbents in the grocery category, particularly for perishables.
The focus on delivery, the Wedbush analysts said, plays to Amazon’s strengths — its fulfillment network and Prime membership — rather than trying to compete store-for-store with Walmart, Kroger, and other entrenched players with thousands of locations.
The company is also testing “Amazon Now,” an ultra-fast delivery service that promises groceries and essentials in 30 minutes or less, using small rapid-dispatch hubs, starting in Seattle and Philadelphia.
Amazon stock closed up 2.6% on Tuesday. Instacart fell nearly 6%, a sign that investors see Amazon’s shift to delivery as a direct threat to the grocery delivery company’s core business.
The broader stakes are huge. Americans spend more than $1 trillion a year on groceries, and Amazon has been chasing that market since it launched Fresh delivery in Seattle in 2007.
The company now claims to be one of the top three grocers in the U.S., with more than $150 billion in annual gross sales. Whole Foods sales have grown more than 40% since the 2017 acquisition, and Amazon plans to open more than 100 new stores over the next several years.
Challenges for Whole Foods
But Ladd asserts that even Whole Foods has a fundamental problem Amazon isn’t adequately addressing. He says a large number of Whole Foods customers leave the store to finish their grocery shopping at competitors that offer mainstream brands like Coke, Tide, and Oreos.
Amazon is testing a workaround. At a Whole Foods in Plymouth Meeting, Pa., the company has installed a “store within a store” concept that lets shoppers scan QR codes on shelf displays to order name-brand items — Kraft Mac & Cheese, Tide Pods, Pepsi — that are then fulfilled by a 10,000-square-foot automated micro-fulfillment center hidden in the back of the store.
The items are ready for pickup by the time the customer finishes shopping, with assistance from a small fleet of specialized robots behind the scenes. Amazon says it plans to expand the concept to additional Whole Foods locations in the future.
Ladd isn’t impressed. The simpler solution, he said, would be to just put the products on Whole Foods shelves, in an “Amazon Grocery” section. Buechel’s resistance to this approach, Ladd argues, has forced Amazon into expensive workarounds that won’t solve the problem.
Amazon says it will keep operating a hybrid Amazon grocery store alongside Whole Foods in Chicago. The company also recently won approval to build a 230,000-square-foot “supercenter” outside , combining groceries with general merchandise.
‘A truly differentiated idea’
The original vision for Amazon’s physical grocery and convenience stores came from Bezos himself, based on a conviction that computer vision and artificial intelligence could eliminate what he believed many customers hated most about shopping: waiting in line to pay.
In his 2021 book “Amazon Unbound,” journalist Brad Stone described the project as “one of the most quixotic and expensive bets in the company’s history.” Bezos had envisioned thousands of Amazon Go stores in urban areas around the country. At its peak, there were 26.
Bezos himself initially scrapped a larger grocery vision, according to the book. After touring a mock store, he told the team the experience was “too complicated” — customers would have to wait in line for meat and produce to be weighed, undermining the whole point.
They pivoted to the smaller convenience store format that launched at Amazon headquarters in 2018, later returning to larger formats with the Amazon Go Grocery store on Seattle’s Capitol Hill in 2020 and the Amazon Fresh grocery stores that began opening that same year.
Long before any of this, back in 2012, interviewer Charlie Rose asked Bezos if Amazon would ever open its own physical stores.
“Only if we can have a truly differentiated idea,” Bezos replied. “We want to do something that’s uniquely Amazon. … We haven’t found it yet, but if we can find that idea, we would love to open physical stores.”
Their ideas were different, for sure. But all these years later, it seems they’re still searching.
