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February 13, 2025
Why Is Amazon Flailing at Brick-and-Mortar Retail?
An article in the Wall Street Journal documents the shortcomings Amazon has faced across numerous experiments with brick-and-mortar retail, questioning why the dominant global e-commerce player “can’t seem to make its physical stores work.”
The article noted that Amazon Go, the convenience store concept launched in 2018 and supported by the company’s “Just Walk Out” technology, now has 16 stores after cutting around half of its original store base since early 2023. The closures of Amazon Books, Amazon 4-star, and Amazon Style concepts over the last three years were also cited as examples of ineptness in non-digital retailing.
“I don’t think they really understand retail,” Nick Egelanian, president of retail-advisory firm SiteWorks Retail, told the WSJ. “Running warehouses and shipping stuff efficiently is not the same as greeting a customer and saying, ‘May I help you?’”
In its first public setback around physical retail, Amazon in March 2022 confirmed it was closing all 68 of its Books, 4-Star, and pop-up stores.
In a RetailWire discussion at the time, Neil Saunders, managing director of GlobalData Retail, said the smaller concepts “lacked a real purpose. They were designed for people to pop in and browse rather than as a destination.” Assortments were “disjointed and unfocused,” according to Saunders, with the stores surprisingly lacking an online connection, such as options to pick up online orders or check stock levels before leaving home.
The broadest criticism has been piled on Amazon’s Just Walk Out technology, which allows customers to shop and leave the store without going to a register. Critics of Just Walk Out in the past have questioned the costs and structural challenges related to placing video cameras and other hardware in store ceilings. Privacy advocates have also raised concerns about the technology’s access to customers’ data.
In April 2024, Amazon announced plans to remove its Just Walk Out technology from Amazon Fresh stores, saying customers preferred its Dash Cart smart shopping cart devices.
In apparel, a setback was the closing in November 2023 of its two tech-infused Amazon Style stores after a two-year test. Amazon Style featured a less-cluttered array of display items on selling floors. Shoppers scanned the QR codes of items they liked, leading staff to gather the garments in the proper color and size for shoppers to try on in fitting rooms.
Specifically around grocery, Amazon in early 2023 indicated it was closing some Amazon Fresh supermarkets as well as Go convenience stores in a cost-cutting move while pausing expansion on Amazon Fresh to rethink its grocery approach. Amazon CFO Brian Olsavsky said on a quarterly earnings call, according to USA Today, “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.”
Amazon appears to earn credit for generally maintaining the status quo of Whole Foods following its 2017 acquisition while driving growth and finding some success in reducing the chain’s “whole paycheck” reputation for high prices.
Newer experiments include testing a smaller Whole Foods Market Daily Shop and reconfiguring some fulfillment centers to allow Prime members to add goods from Amazon.com, Amazon Fresh, and Whole Foods in one cart to support a one-stop shopping solution.
An opinion article in the Financial Times last year concluded that not being able to extend Amazon’s online benefits, including low prices and expansive offerings, to physical stores is the conundrum.
“Whole Foods is a high-end U.S. chain with prices to match. Go and Fresh convenience stores are too small to offer shoppers a huge number of options. Nor are they considerably cheaper than rivals. It is still difficult to see exactly what distinguishes Amazon on the high street,” the FT stated. “Online, it is known for being cheap, fast and comprehensive. Physical stores should take a similar approach.”
Discussion Questions
Is there a common missing element across Amazon’s underwhelming experiments with physical retail?
What may Amazon still have to learn about brick-and-mortar retail?
Poll
Loading …BrainTrust
Frank Margolis
Executive Director, Growth Marketing & Business Development, Toshiba Global Commerce Solutions
Cathy Hotka
Principal, Cathy Hotka & Associates
John Lietsch
CEO/Founder, Align Business Consulting
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Amazon is a very left-brained organization in the way it implements its knowledge. It knows how to deliver what customers want via technical solutions – and it is extremely good at doing it. The other thing Amazon likes to do is revolutionize. It likes to change the status quo and disrupt traditional ways of doing business.
That’s why many approaches to stores have been both technical and disruptive: walk-out technology at Amazon Go, digital fitting rooms in Style stores, and so on.
The problem is that, while at some level these things solve for genuine issues, they are not primary drivers of customer demand in the physical realm, and they are not sufficient to get people to switch where they shop.
I think we’re looking at this all wrong: Amazon isn’t flailing, failing or any other negative connotationed f-word, it’s experimenting.; which is to say their br&m efforts aren’t really designed to make a profit, they’re designed as labs…so who’s to say whether the results are “as desired ” or not?
You’ve hit the nail on the head. The Amazon model doesn’t often align with traditional industry models. A bottom line profit must be earned, but often takes a different route.
Amazon is missing the key point of people physically coming to a store – there has to be a compelling reason to do so. A store featuring their online best sellers is trite at best, and the Go stores weren’t nearly as convenient as promised (aside from the technology itself not working). Retail is details, not just logistics.
The keys to Amazon’s initial success was that it understood the needs of its customers and leveraged technology to disrupt and dominate the market. In exchange, it got a few more orders than everybody else, COMBINED!
It feels like Amazon is competing in physical retail and not disrupting physical retail. “Just Walk Out” doesn’t work if we “don’t walk in.” Unfortunately, competition in retail is fierce when you’re “just another retailer.” Amazon needs to pull an “Amazon” and do with physical retail what it did with ecommerce.
Physical retail is Primed for an Amazonian disruption!
Amazon does not have retail in their DNA, and it shows. An example from the “way back” machine is Gas companies trying to become retailers. Amoco, Shell, BP, etc. tried to upgrade their retail operations, and while they did not fail they did not really succeed either. The DNA was heavy in production, not in retail. It took new entries (Sheetz, Etc.) to get this right.
While this is not an absolute rule, it is instructive when a company tries to change or innovate in a way that is not historically part of the culture.
It’s easy to catalog Amazon’s problems in retail; It’s less easy to see if the company wants to address them.
When I visit an Amazon physical grocery retail location, I see an online first approach. The stores are filled with pickers picking online orders. They are not filled with shoppers. Even at key grocery shopping times and days.
The newer Amazon grocery stores have improved. The Dash Carts seem popular and work as promised. Assortment has gotten better. With those improvements, you are still shopping an online grocery order fulfillment site.
Interesting that a key frustration of grocery shoppers, long checkout lines, isn’t a problem.
In order to tailor the in-store experience to the preferences of individual customers, Amazon could leverage its vast data analytics capabilities.
Amazon can create a seamless shopping experience by integrating technology such as cashier-less checkout systems and personalized recommendations. Collaboration with local businesses or the implementation of unique in-store events can also assist in attracting more foot traffic and building a stronger sense of community.
A loyalty program that offers personalized discounts and promotions based on shopping behavior would also be valuable for Amazon. It is possible to further engage customers by implementing interactive kiosks that provide tailored information about products and suggestions.
The implementation of real-time feedback systems would also improve customer satisfaction and allow retailers to quickly adapt to changing customer preferences.
Jeez. I thought I was the only one who thought Just Walk Out was baloney.
it’s not that they don’t understand retail..they don’t understand people. Everything they do points to that. From their pandemic era attitudes to thinking people didn’t want stores. A smart company would put themselves in the customer’s shoes, and not just 19 year old incels. Honestly, it really is a tech company. It’s not a very good retailer.
And Bezos addiction to PR has gotten old. AWS is a winner. I’m starting to use Walmart delivery a little more because I got it free with my Amex card. So far, I’m not thrilled with the marketplace. But I do like their in stock positions.
in other words, Amazon is not a retailer. It’s a tech company that decided to buy a fleet of planes
AWS of course would be completely viable split off. A logistics (warehousing + home delivery) spin-off would be a powerful, innovative, and necessary competitor to UPS and FedEx. And that leaves the shopping side – is it truly viable without the other two legs? If not, after all this time and disruption, why not just exit?
Many retailers, large and small, have shifted from physical retail to a hybrid model that includes online; why can’t a retailer do the opposite, online to hybrid with physical retail? Amazon may look like they are not doing the physical brick-and-mortar well, but I’ll argue they are. So they open and close stores. So they try technology and refine or replace it. Isn’t that what successful retailers do? They test, experiment, etc. Amazon didn’t go “all in” on physical. There were a limited number of stores. And if you are looking at Amazon’s brick-and-mortar expansion, you can’t ignore the success of Whole Foods. Not everything Amazon touches will turn to gold. So, here’s the question for the people looking for fault in Amazon. What happens when its next brick-and-mortar retail experiment works and takes off? Then people will say, “They are geniuses.” (They already are!) It’s only a matter of time!
Yes, there is a common missing element in Amazon’s attempt at brick-and-mortar retail, and it’s two fold. They don’t know how to do it (it’s not in the company’s DNA), and the have tried to be too cute with the Amazon Go concept. The world is not ready.
For grocery store operations, Amazon Fresh is loaded with tech and efficiency, but seemingly missing from the experience is the obvious primary driver or two from the list of the Big 6 Grocery Shopping motivators preferred by customers – Quality, Variety/Selection, Customer Service, Convenience, Ad Values or Price/EDLP. Most grocery stores have one or two of these driving their business, and they lead implementation on brand, communication, products, merchandising, pricing, and operations.
Whole Foods, on the other hand, has been lead from the start by Quality, and Variety/Selection, although it morphed some.
Amazon can be successful in grocery, and should pick a path or two, then execute. Because they already know the back end pieces of supply chain, cost minimization, innovation and efficiencies to make it all work.
Amazon struggles with physical retail because it treats it the same way it does Amazon.com: without experience, customer service, interactivity, or a real reason to go there. So far, Amazon has never successfully integrated online and offline with tech and experience the way Walmart has.
Amazon’s biggest mistake in physical retail is treating stores like an experiment instead of understanding what makes them work.
They keep pushing tech gimmicks like Just Walk Out, but retail is about experience. Customers want human interaction, thoughtful store design, and a reason to visit beyond convenience.
Amazon dominates online retail because of selection and price, but that doesn’t automatically translate to brick-and-mortar. Until they stop approaching physical retail like an extension of their online store and start thinking like real retailers, their stores will fail.