Amazon slows grocery expansion, will close Fresh and Go stores

The e-commerce giant is once again changing up its grocery strategy, closing underperforming Fresh and Go stores.
An Amazon Fresh worker pushes a cart down a store aisle.
  • Amazon is rethinking its expansion strategy into grocery.
  • The retailer will exit Fresh and Go stores with low-growth potential, Brian Olsavsky, Amazon’s chief financial officer, said.
  • Amazon’s CEO Andy Jassy said the retailer is committed to building a strong, omnichannel grocery experience. 

Amazon is rethinking its grocery strategy and will slow the expansion of its brick-and-mortar grocery stores, company executives said during a call with investors

Brian Olsavsky, the e-commerce giant’s chief financial officer, during Amazon’s Feb. 2 fourth-quarter earnings call said the retailer would close stores in certain markets.

“We're continuously refining our store formats to find the ones that will resonate with customers, will build our grocery brand and will allow us to scale meaningfully over time,” Olsavsky told investors. “As such, we periodically access our portfolio of stores and decided to exit certain stores with low-growth potential.” 

Amazon has not said how many Amazon Fresh or Amazon Go stores it will close (there are currently 44 Amazon Fresh locations and 28 Amazon Go stores), but Amazon CEO Andy Jassy on the call reiterated the company's commitment to the grocery space, which he said would continue to evolve toward an entirely omnichannel experience that supports every type of consumer, whether they shop in-store, online or more than likely, through both channels.

“We're doing a fair bit of experimentation today in those stores to try to find a format that we think resonates with customers,” Jassy said on the call. “It's differentiated in some meaningful fashion and where we like the economics. We’ve decided over the last year or so that we're not going to expand the physical Fresh doors until we have that equation with differentiation and economic value that we like, but we're optimistic that we're going to find that in 2023.” 

Amazon in January made further adjustments to its grocery offerings, raising the threshold of how much a Prime customer has to spend to earn free delivery on an Amazon Fresh grocery order. Previously, it offered free delivery to Prime customers on orders more than $35, though customers now must spend $150 per order to qualify for free grocery delivery, Retail Leader previously reported

Amazon also owns the popular Whole Foods Market chain of stores, which Jassy on the call with investors said was “a very significant-sized business that's continuing to grow.”

Amazon has continued to toy with its brick-and-mortar retail offerings. Last year it closed dozens of stores in a shake-up of its physical store strategy, including all 4-star stores, bookstores and pop-up locations. The retailer however has pushed ahead with some in-store concepts, including Amazon Style stores, which has two locations, including an Ohio store that opened last fall. Amazon also last year expanded the Go concept to suburban areas, which offer perks of the grab-and-go style store to consumers living outside cities. 

The retailer this year also said that it would eliminate about 18,000 jobs as part of the growing wave of layoffs impacting the retail and technology industries.