Amazon Abandons Physical Stores: The End of a Billion-Dollar Bet on Brick-and-Mortar Retail

Amazon announced this week that it will close all its Amazon Fresh and Amazon Go stores, ending nearly a decade of attempts to dominate physical food retail. It's one of the tech giant's biggest admissions of failure and raises an important question: can companies born digital really succeed with street-level stores?

When Technology Isn't Enough

The numbers tell a disappointing story. Amazon operates just 14 Go stores and 58 Amazon Fresh locations, far from the initial ambition of opening 3,000 Go units by 2021. In a statement, the company acknowledged it failed to create a truly differentiated experience with a viable economic model for large-scale expansion. It's rare to see Amazon admit defeat so openly.

Amazon Go, launched in 2018, promised to revolutionize quick shopping with its automatic checkout technology. The idea was simple: you walk in, grab what you want, and leave while ceiling-mounted cameras and sensors automatically charge your account. But the expensive infrastructure made it impossible to replicate the concept at scale. Interestingly, the company found more success selling this technology to other retailers—today it operates in over 360 third-party locations.

Fresh Never Got Fresh Enough

Amazon Fresh stores faced different problems. After opening the first location in 2020, the company tweaked the concept multiple times: changed the decor, expanded the assortment, lowered prices, introduced smart carts. Nothing worked. Ultimately, the stores couldn't differentiate themselves in a market where giants like Walmart and Kroger have operated for decades and know every detail of the business.

The human cost is steep. Thousands of hourly workers will lose their jobs, along with dozens in corporate positions. Amazon says it will help relocate workers to other areas of the company, including Whole Foods and distribution centers.

The Pivot: Betting on What Works

Rather than abandoning the food sector entirely, Amazon is doubling down on what's working: online delivery and Whole Foods. The company plans to expand same-day delivery to many more communities in 2026 and open over 100 new Whole Foods stores in the coming years. Some Fresh and Go locations will be converted into Whole Foods.

The digital strategy shows impressive results. Sales of perishable products through the same-day delivery service have grown 40-fold since January 2025. Fresh foods now represent nine of the ten most-ordered items in areas where the service is available. The company is also testing Amazon Now, which promises to deliver essential products, including fresh food, in about 30 minutes.

What Amazon Learned the Hard Way

This course correction reveals a mature understanding of where Amazon truly excels. The company is exceptional at logistics, convenience, and technological integration, but these qualities work better for deliveries than for operating physical stores. Even with over $150 billion in gross food sales, making it one of the top three in the sector in the United States, this success comes mainly from non-perishable products ordered online.

The closure also reflects broader difficulties Amazon faces in physical retail. Since opening a bookstore in 2015, the company has launched and closed various concepts: Amazon 4-Star stores, electronics kiosks, a clothing store. The pattern suggests Amazon's core competency remains digital commerce and distribution infrastructure, not destination retail.

Lightning-Fast Shutdown

What makes this retreat particularly notable is the timing and scale. Most stores close on Sunday, except in California, where state laws require longer advance notice. The speed and completeness of the shutdown indicate this wasn't a decision to pause and refine, but rather a fundamental reassessment of where Amazon should invest capital and attention.

Looking ahead, Amazon signals it hasn't completely abandoned physical retail experimentation. The company recently received approval to build a large-format store combining groceries, household products, and general merchandise—potentially a supercenter concept. It's also testing hybrid formats, including Whole Foods locations with attached micro-fulfillment centers that allow customers to pick up broader Amazon orders.

Lesson for the Market

For the food industry, Amazon's retreat offers some validation. Traditional retailers have always argued that food retail requires deep operational expertise, thin margins demand scale and efficiency, and meaningful differentiation is exceptionally difficult to achieve. Amazon's struggles confirm these realities. Not even a company with Amazon's resources, technology, and customer data could simply create a successful food store network from scratch.

The lesson here goes beyond groceries. Digital dominance doesn't automatically transfer to physical retail success. Different channels require different capabilities, and Amazon's decision to focus on its strengths represents a pragmatic recognition of these limitations.

By directing resources toward delivery and Whole Foods expansion, the company is essentially betting that the future of food isn't about reinventing the physical store, but rather making it easier for customers to avoid visiting stores altogether. Whether this bet is correct, only time will tell. For now, the era of Amazon-branded grocery stores has come to an unceremonious end.

Sam Smith