Amazon.com (AMZN), once a pioneer that raced ahead with its revolutionary e-commerce business to become an emerging giant surpassing Wal-Mart (WMT), is now placing a significant bet on a large-format physical supermarket model—a format traditionally synonymous with its rival from Bentonville, Arkansas.
According to estimates from London Stock Exchange Group (LSEG), Amazon is scheduled to release its earnings report this Thursday. The market anticipates that its fourth-quarter physical store revenue, which includes Whole Foods Market, Amazon Fresh, and Amazon Go, will increase by 5.4% year-over-year to reach $5.9 billion; the company's overall earnings per share are projected to be $1.97.
Although the revenue growth of Amazon's technology division, Amazon Web Services (AWS), is rapid and accounts for 18% of total company revenue, its retail business remains a core segment. Last month, Amazon announced the closure of all its Amazon Fresh and Amazon Go stores, converting them into Whole Foods Market locations, a decision that sends a clear signal of a strategic pivot.
Amazon's latest major initiative involves opening a massive 225,000-square-foot physical supermarket in the Chicago suburbs—marking its first venture into this specific format, aimed at directly competing with Walmart and Costco. The planned store will sell fresh produce, household essentials, and general merchandise, while also serving as a fulfillment center for same-day delivery.
Martin Hojbjerg, an Amazon seller consultant, stated, "Amazon understands that it must win in the grocery business. Consumers who purchase groceries and fast-moving consumer goods often possess the highest customer lifetime value." His clients ship products directly to Amazon for sale through both its physical stores and online channels.
Amazon indicated that its past strategies failed to create a differentiated shopping experience capable of supporting large-scale expansion. Amazon declined to comment further on the matter.
B.Z., an analyst at S&P Global, commented, "I don't believe a full-scale commitment to physical retail is necessarily Amazon's long-term strategy. They will need some time to catch up."
Walmart's Physical Footprint
For years, Walmart lagged behind Amazon in the e-commerce domain, but the launch of its Walmart+ membership service in September 2020 shifted the dynamics. Data from Morgan Stanley Research indicates that by 2025, this service is expected to have 26.5 million members; its e-commerce business continues to grow, with sales increasing 28% year-over-year in the most recent quarter.
Walmart's advantage is partly derived from its extensive network of physical stores: 4,600 locations across the U.S. capable of handling pickup orders and same-day delivery services. The company states that 90% of the U.S. population lives within 10 miles (approximately 16.1 kilometers) of one of its stores. Asit Sharma, a senior investment analyst at The Motley Fool, noted that this infrastructure helps the retailer save on last-mile delivery costs—precisely what Amazon aims to achieve.
Walmart's retail sales reached $177.8 billion in the third quarter, while Amazon's total sales from online and physical stores were nearly $80 billion. Walmart declined to comment.
Amazon began building its physical network since opening its first Amazon Go store in 2016; it acquired Whole Foods Market for $13.7 billion in 2017 and launched Amazon Fresh in 2020. Following this recent restructuring, it appears only Whole Foods Market will be retained.
Sharma added, "Amazon also wants to develop a model where customers come to the store for pickup, effectively solving the last-mile delivery challenge themselves."
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