Why Amazon Fresh and Amazon Go Failed: Amazon’s Misguided Path in Brick-and-Mortar Retail

Amazon’s withdrawal from brick-and-mortar grocery retail with its Amazon Fresh and Amazon Go formats came as a surprise to many observers. However, it is the result of a long series of strategic misjudgments and operational challenges. What began as an ambitious attempt to fundamentally transform grocery retail through digital technologies evolved over the years into a complex, cost-intensive, and ultimately unsustainable business model. A chronological review of decisions and missteps shows that the store closures are less a short-term reaction to market changes than the inevitable consequence of structural errors that accumulated over time.

Phase 1 (from 2016): Technological Optimism Over Market Understanding

With the launch of Amazon Go, Amazon early on embraced a radically technology-driven vision of retail. Cashierless stores were intended to revolutionize shopping and serve as a blueprint for the future of physical retail.

Error:  Amazon assumed that technological superiority would automatically translate into customer acceptance and economic viability. In doing so, it underestimated:

that customers perceived only limited added value from the technology,
that grocery retail is primarily driven by price and trust, and
that high technological complexity generates enormous day-to-day operating costs.

➡️ From the outset, technology—not the customer—was at the center of the strategy.

Phase 2 (2018–2020): Lack of Positioning and an Unclear Target Audience

With Amazon Fresh stores, Amazon attempted to transfer the concept to full-scale supermarkets. These stores were meant to be modern, data-driven, and competitively priced.

Error:  Amazon failed to define a clear target audience:

Too expensive for price-sensitive shoppers.
Not premium enough for quality-focused customers.
Too stationary for online-oriented Prime users.

➡️ The stores occupied no clear market position and failed to build a loyal customer base.

Phase 3 (2019–2021): Expansion Ahead of Profitability

Amazon opened new Fresh and Go locations before there was solid evidence that individual stores could be sustainably profitable.

Error:

High rents in urban locations.
Low margins in grocery retail.
High staffing and technology costs.

The classic Amazon approach of “scale first, optimize later” proved ill-suited to brick-and-mortar retail.

➡️ Growth did not replace a sustainable cost structure.

Phase 4 (2020–2022): Underestimating the Operational Reality of Grocery Retail

Day-to-day operations revealed that grocery retail is significantly more complex than other retail segments:

Fresh products require precise planning.
Spoilage leads to substantial losses.
Localized assortments are critical.

Error:  Amazon attempted to standardize processes where local adaptation was necessary.

➡️ Software expertise could not compensate for a lack of traditional retail know-how.

Phase 5 (2021–2023): Internal Cannibalization Through Whole Foods

Alongside Amazon Fresh, Amazon continued to operate Whole Foods Market—an established and trusted brand.

Error:

Overlapping product assortments.
Unclear brand messaging.
Internal competition for investment, locations, and management attention.

Whole Foods proved to be the significantly stronger brand, while Amazon Fresh emerged as an unnecessary secondary format.

➡️ Instead of brand focus, strategic fragmentation emerged.

Phase 6 (from 2022): Failure to Adapt to Changing Consumer Behavior

Following the pandemic, consumer behavior shifted markedly:

Online grocery orders increased.
Same-day delivery gained importance.
Foot traffic in city centers declined.

Error:  Amazon held on too long to plans for physical store expansion, even as its online grocery business grew faster and proved more scalable.

➡️ Investment decisions no longer followed customer behavior.

Phase 7 (2024–2026): Strategic Cutback and Withdrawal

Ultimately, Amazon drew clear conclusions:

Closure of Amazon Fresh and Amazon Go.
Strategic focus on online grocery and same-day delivery.
Expansion of Whole Foods as the sole brick-and-mortar pillar.

➡️ The closures are the result of a long chain of earlier misjudgments—not a short-term crisis.

Overall Conclusion

Amazon did not fail because of a single error, but because of a sequence of systematic missteps:  Technology was overestimated, market mechanics underestimated, expansion prioritized over learning, and customer needs reassessed too late.

The closure of Amazon Fresh and Amazon Go therefore represents less a failure of the company itself than a correction of a long-pursued but ultimately unsuitable approach to brick-and-mortar grocery retail.