Amazon is pulling back its physical grocery store experiment in the UK after several years of expansion and innovation that failed to deliver the results it expected. The company has announced it will close all 19 of its Amazon Fresh stores in Britain, converting five into Whole Foods locations, and shift its emphasis toward online delivery, partnerships, and premium formats. The move exposes the difficulty even a giant like Amazon faces when trying to crack the UK grocery market on its own terms.
Strategy Amazon Followed in Britain and Its Expectations
When Amazon entered the UK grocery market with Amazon Fresh stores in 2021, it aimed to blend cutting-edge tech with convenience. The Fresh stores featured “Just Walk Out” and other cashier-less technologies, allowing customers to pick items and leave without going through traditional tills. It opened its first Fresh store in West London and envisioned ramping up to over 200 such locations by the end of 2024. The model was intended to be mass-market, combining speed, technology, and Amazon’s logistical strength.
Amazon also invested in online grocery delivery, expecting that customers would shift to ordering fresh and perishable groceries alongside everyday essentials from Amazon.co.uk and the Amazon Fresh online platform. It forged partnerships with established local supermarkets such as Morrisons, Co-op, Iceland, and delivery firms like Gopuff so that even if its own stores did not reach every location, its delivery footprint could be wide and fast.
The expectations were ambitious: capture a meaningful slice of the UK’s grocery market, which is huge and sophisticated; disrupt legacy supermarket chains; leverage Amazon’s reputation for fast delivery and technology; and make Fresh stores serve both as showpieces of innovation and as profitable, high-frequency retail outlets. The company seemed to believe that technology, combined with Amazon’s supply chain integration, could overcome low margin pressures.
Why Things Went Wrong: Challenges and Miscalculations
Despite Amazon’s resources, several missteps and market realities undercut the strategy. The UK grocery sector is one of the most competitive in the world, with many established players, slim margins, and customer expectations deeply shaped by price, convenience, and habit. Even discount chains and online supermarkets have had to operate at tight profit margins for decades. For Amazon, opening and operating tech-intensive stores in prime locations required high initial investment (leases, tech infrastructure, store fitting), and sales volume was often not high enough to justify those costs.
Consumer behavior also didn’t align with Amazon’s assumptions in some respects. Although “Just Walk Out” technology created buzz, many UK shoppers were more interested in value, promotions, reliability, and low price than in novelty. The cost of living crisis made shoppers more price-sensitive, reducing willingness to pay premium prices for convenience or tech features. Amazon’s physical stores often had higher price points or fewer promotions compared to traditional supermarkets.
Another issue was supplier relations and regulatory pressures. Amazon earned a reputation in Britain for delays in payments to suppliers, compliance issues under the Groceries Supply Code of Practice, and disputes over delivered quantities. These frictions undermined its credibility and added operational friction. Moreover, the company’s Fresh stores were subject to high running costs—including rent, staff, technology maintenance—and underperformed in several high-density, expensive locations that were already saturated by established grocers.
Finally, Amazon appears to have overestimated how quickly online grocery penetration could rise, and how successfully it could scale same-day delivery of perishables in the UK. Though it projected that over a quarter of grocery shopping in the UK would be online by 2030, actual online grocery share remains far lower, meaning the base of customers willing to shift behavior—and pay for premium convenience—is smaller than expected.
Comparison with Grocery Strategy in Other Markets
Amazon’s grocery strategy has varied widely outside the UK, with differing outcomes depending on market structure, consumer behavior, and regulatory environments. In the United States, Amazon operates not only advanced physical formats like Amazon Fresh supermarkets but also Whole Foods Market and Amazon Go convenience stores. Some Fresh and Go store expansions have been delayed or scaled back, but Amazon has had more success integrating its online and brick-and-mortar operations, especially leveraging large rural-suburban markets where store costs and consumer expectations differ from central London.
In Germany, Amazon had operated grocery delivery and Fresh stores but pulled back delivery services in several cities. The decision in Germany reflects similar challenges—the cost of fulfilling fresh groceries, competition from local discounters and supermarkets, regulatory cost, and logistics complexity. Across both the UK and Germany, Amazon has found that while the tech and novelty can draw initial attention, sustaining profitability is hard.
In contrast, online grocery delivery tends to perform better in markets with strong delivery-friendly infrastructure and consumer familiarity with online ordering of food. In markets like the U.S., some Asian economies, and parts of Europe where eCommerce logistics, cold chains, and consumer expectations are well developed, Amazon has been able to lean more heavily into its strengths—fast delivery, product variety, subscription models. In those places, fewer physical store experiments have been needed or successful, and where they have existed, they serve more premium or specific local segments rather than mass-market grocery.
Whole Foods has also performed differently than Fresh: positioned as a premium grocer, it appeals to consumers willing to pay more for organic, specialty, or higher-quality products, which is a smaller but more stable market niche. In the UK, converting some Fresh stores to Whole Foods signals Amazon acknowledging that the mass-market Fresh model did not resonate broadly enough.
(Source:www.independent.co.uk)
Strategy Amazon Followed in Britain and Its Expectations
When Amazon entered the UK grocery market with Amazon Fresh stores in 2021, it aimed to blend cutting-edge tech with convenience. The Fresh stores featured “Just Walk Out” and other cashier-less technologies, allowing customers to pick items and leave without going through traditional tills. It opened its first Fresh store in West London and envisioned ramping up to over 200 such locations by the end of 2024. The model was intended to be mass-market, combining speed, technology, and Amazon’s logistical strength.
Amazon also invested in online grocery delivery, expecting that customers would shift to ordering fresh and perishable groceries alongside everyday essentials from Amazon.co.uk and the Amazon Fresh online platform. It forged partnerships with established local supermarkets such as Morrisons, Co-op, Iceland, and delivery firms like Gopuff so that even if its own stores did not reach every location, its delivery footprint could be wide and fast.
The expectations were ambitious: capture a meaningful slice of the UK’s grocery market, which is huge and sophisticated; disrupt legacy supermarket chains; leverage Amazon’s reputation for fast delivery and technology; and make Fresh stores serve both as showpieces of innovation and as profitable, high-frequency retail outlets. The company seemed to believe that technology, combined with Amazon’s supply chain integration, could overcome low margin pressures.
Why Things Went Wrong: Challenges and Miscalculations
Despite Amazon’s resources, several missteps and market realities undercut the strategy. The UK grocery sector is one of the most competitive in the world, with many established players, slim margins, and customer expectations deeply shaped by price, convenience, and habit. Even discount chains and online supermarkets have had to operate at tight profit margins for decades. For Amazon, opening and operating tech-intensive stores in prime locations required high initial investment (leases, tech infrastructure, store fitting), and sales volume was often not high enough to justify those costs.
Consumer behavior also didn’t align with Amazon’s assumptions in some respects. Although “Just Walk Out” technology created buzz, many UK shoppers were more interested in value, promotions, reliability, and low price than in novelty. The cost of living crisis made shoppers more price-sensitive, reducing willingness to pay premium prices for convenience or tech features. Amazon’s physical stores often had higher price points or fewer promotions compared to traditional supermarkets.
Another issue was supplier relations and regulatory pressures. Amazon earned a reputation in Britain for delays in payments to suppliers, compliance issues under the Groceries Supply Code of Practice, and disputes over delivered quantities. These frictions undermined its credibility and added operational friction. Moreover, the company’s Fresh stores were subject to high running costs—including rent, staff, technology maintenance—and underperformed in several high-density, expensive locations that were already saturated by established grocers.
Finally, Amazon appears to have overestimated how quickly online grocery penetration could rise, and how successfully it could scale same-day delivery of perishables in the UK. Though it projected that over a quarter of grocery shopping in the UK would be online by 2030, actual online grocery share remains far lower, meaning the base of customers willing to shift behavior—and pay for premium convenience—is smaller than expected.
Comparison with Grocery Strategy in Other Markets
Amazon’s grocery strategy has varied widely outside the UK, with differing outcomes depending on market structure, consumer behavior, and regulatory environments. In the United States, Amazon operates not only advanced physical formats like Amazon Fresh supermarkets but also Whole Foods Market and Amazon Go convenience stores. Some Fresh and Go store expansions have been delayed or scaled back, but Amazon has had more success integrating its online and brick-and-mortar operations, especially leveraging large rural-suburban markets where store costs and consumer expectations differ from central London.
In Germany, Amazon had operated grocery delivery and Fresh stores but pulled back delivery services in several cities. The decision in Germany reflects similar challenges—the cost of fulfilling fresh groceries, competition from local discounters and supermarkets, regulatory cost, and logistics complexity. Across both the UK and Germany, Amazon has found that while the tech and novelty can draw initial attention, sustaining profitability is hard.
In contrast, online grocery delivery tends to perform better in markets with strong delivery-friendly infrastructure and consumer familiarity with online ordering of food. In markets like the U.S., some Asian economies, and parts of Europe where eCommerce logistics, cold chains, and consumer expectations are well developed, Amazon has been able to lean more heavily into its strengths—fast delivery, product variety, subscription models. In those places, fewer physical store experiments have been needed or successful, and where they have existed, they serve more premium or specific local segments rather than mass-market grocery.
Whole Foods has also performed differently than Fresh: positioned as a premium grocer, it appeals to consumers willing to pay more for organic, specialty, or higher-quality products, which is a smaller but more stable market niche. In the UK, converting some Fresh stores to Whole Foods signals Amazon acknowledging that the mass-market Fresh model did not resonate broadly enough.
(Source:www.independent.co.uk)
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