Amazon’s Go and Fresh closures offer a lesson about differentiation

With Go stopped and Fresh stale, Amazon’s attempts at brick-and-mortar grocery dominance continue to come up short.

Late last month, Amazon announced it would close its Amazon Go and Amazon Fresh locations, claiming it failed to establish “a truly distinctive customer experience with the right economic model needed for large-scale expansion,” with plans to convert some locations to Whole Food Markets stores.

The closures weren’t exactly a surprise. The e-commerce giant has been making a push into brick-and-mortar grocery since its acquisition of Whole Foods in 2017, but the efforts beyond that deal haven’t exactly been fruitful. The Amazon Go and Fresh concepts, opened in 2018 and 2020, respectively, introduced consumers to Just Walk Out technology. Since then, they’ve had revamps, with locations being shuttered or left vacant, and Fresh stores even shifted away from the cashierless tech in 2024 in favor of Dash Carts.

With its new concepts, Amazon already faced an uphill battle in the crowded US grocery market, but many of the company’s strategies didn’t help. We asked industry experts why Amazon’s push into brick-and-mortar grocery failed, and what it says about the US grocery industry and the tight competition within it.

Why does Amazon want to succeed in grocery so badly?

Amazon CEO Andy Jassy said last May he’s “very bullish” on grocery.

That’s likely because grocery is a treasure trove of consumer data, Katherine Black, partner at Kearney leading food, drug, and mass market retail, noted. Amazon’s ad business is a significant revenue driver (it rose 22% to $21.3 billion in Q4), and the data and analytics driving that business rely on transaction frequency. Grocery is a high-frequency category, and food suppliers are willing to spend a lot of $$ on ads, making it attractive for Amazon, Black said. Andy Tsay, professor of business and analytics at Santa Clara University’s Leavey School of Business, also noted that data is likely a driving force.

“Whoever controls the weekly food shop controls the customer relationship, which leads to data and insight about changes and preferences, which ultimately brings the ability to sell more to those customers both offline and online,” he said.

So what went wrong?

“It’s notoriously difficult to enter grocery as a new brand,” Black said. “The market is very fragmented and relatively saturated in many markets, and consumers build habits in grocery.”

The stores relied too heavily on tech, an attribute that’s not as important to shoppers, especially if it’s not clearly saving consumers time or money, she said. Consumers won’t get “excited about technology for technology’s sake,” she noted.

Price, value, and assortment are higher priorities for consumers, and Amazon wasn’t quite winning there either. Location is essential too, and with smaller basket sizes and higher shrink and operational costs, urban locations can be tough to make profitable, while its suburban Fresh locations were also in high-rent areas, she said. Tsay noted the closures serve as a reminder that “physical grocery is just brutally operational,” with “thin” and “unforgiving” margins.

Tsay also noted an “initial creepiness” to Amazon Go that felt like a “science experiment.” The stores “lacked a bit of personality,” and were “pretty generic,” Steve Caine, partner at Bain & Company and retail and customer strategy and marketing expert, said. They didn’t have “local flair” needed to steal share from regional banners, but also couldn’t compete with national retailers like Walmart, Aldi, and Costco on value.

These Amazon concepts were also quite new, and US grocery is “a long game,” Black said, as evidenced by Aldi’s decades-long runway to stateside success. But even if Amazon had stuck it out, being a sub-scale grocer—lacking local scale for fresh food and national or regional scale for high volume—in an industry in the midst of consolidation is a difficult task, Cain said.

Its forthcoming plan to open a megastore, with its largest-ever store outside Chicago, selling groceries and general merchandise, might not be a win, either. Walmart, Target, Meijer, and Costco in that region operate similar concepts, so it’ll have to steal large volumes from them to pull it off, Caine said.

What can other grocers learn from this?

The closures may have induced a sigh of relief or a “We told you grocery is hard,” but they can also learn some things. Grocers should optimize their e-commerce presence, supply chain, and fulfillment, and tighten up their value proposition and what makes them different, Cain said, whether that’s connection to and saturation of a local market or, well, cheap prices.

Local loyalty runs deep, but consumers could change their ways if Amazon finally figures out grocery, Black said.

“Consumers will leave their local regional player if they get a much better deal, but it can’t be marginally better, and it can’t be implied or you hope consumers will discover [it],” she said.