• by Sarah Mahoney , 2 hours ago

Amazon — still determined to conquer grocery retail — is making a major pivot, shuttering all of its Amazon Go and Amazon Fresh stores. Instead, the company says it will “double down” on online grocery delivery and the expansion of Whole Foods Market.

The move comes as Amazon, despite ranking among the top three grocers in the U.S. with more than $150 billion in gross sales and over 150 million customers, has yet to fully deliver on its long-standing ambition to dominate the category.

“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 said in its announcement, calling the decision to close Fresh and Go locations “difficult.”

Instead, Amazon is sharpening its focus on speed and selection. Since adding perishable grocery sales last year, fresh items now account for nine of the top 10 most-ordered products in markets where same-day delivery is available, the company said. It has also rolled out Amazon Now in select markets, promising delivery in 30 minutes or less.

At the same time, Amazon plans to open more than 100 new Whole Foods Market stores over the next few years and is expanding the geographic reach of its same-day delivery service based on customer demand. The decision includes all 14 Go stores and 58 Amazon Fresh stores, and some will be converted into Whole Foods outlets. Amazon also said it will continue expanding Whole Foods Market Daily Shop, a smaller-format concept that currently has five locations.

Analysts see the retrenchment as a necessary reset. “The reason this announcement is so significant is that Amazon has yet to displace incumbents in the grocery category, at least for perishables,” wrote Scott Devitt, who follows the company for Wedbush. “The grocery mix at large general merchandisers such as Walmart, Target, and Costco has made the category of critical importance to Amazon.”

Devitt added that the move could increase pressure on delivery platforms such as Instacart, DoorDash and Uber, which have become key partners for legacy grocers. He also noted that Amazon is “further exploring a new physical retail supercenter,” blending grocery, essentials and general merchandise in a model closer to Walmart’s.

All told, the pivot “will bolster the company’s same-day efforts, adding even more value to Prime memberships,” Devitt wrote.

While some may see the store closures as a failure, Neil Saunders, managing director of GlobalData, argues that misses the point. “Amazon prizes experimentation and testing and has deep enough pockets to support it,” he wrote. “It also uses learnings, even from terminated ventures, to inform future decisions.”

Those learnings include Just Walk Out technology, developed for Amazon Go and now deployed in more than 360 third-party locations. In that context, Saunders argues, Amazon’s physical grocery ambitions are far from over.

“In our view, in one way or another,” he wrote, “Amazon’s physical grocery mantra is: We’ll be back.”