Amazon is accelerating its push into physical grocery retail as it looks to challenge Walmart’s dominance in food and everyday essentials, expanding its Whole Foods Market footprint while testing new smaller-format grocery concepts in dense urban markets.
The company recently announced plans to bring its “Whole Foods Market Daily Shop” concept to the cities of Boston, Chicago and Philadelphia as part of a broader national expansion strategy. The smaller-format stores – typically between 7,000 and 14,000 square feet – are designed for urban neighborhoods and emphasize fresh produce, prepared foods, grab-and-go meals and quick-fill grocery trips. The first Daily Shop location opened last year on Manhattan’s Upper East Side.
Whole Foods said the format is intended to give customers faster access to fresh foods in walkable, high-density markets and urban areas where traditional supermarkets can be difficult to develop. The company also noted the stores will feature local products and seasonal assortments tailored to individual neighborhoods.
Analysts increasingly view Amazon’s grocery strategy as a hub-and-spoke model, pairing larger regional fulfillment-focused stores with smaller neighborhood formats designed for convenience, pickup and rapid replenishment. The expansion comes as Amazon sharpens its broader grocery strategy after years of experimentation across Amazon Fresh, Amazon Go and Whole Foods.
CEO Andy Jassey had this to say at the first quarter’s earnings call, “We’re making customers’ lives easier and better every day across all our businesses, and their response is driving significant growth.” Amazon reported strong growth and net sales increased 17 percent to $181.5 billion in the first quarter ended March 31. Amazon is on an impressive earning run.
The retailer has said it plans to open more than 100 new Whole Foods Market locations over the coming years, signaling a renewed commitment to physical grocery after previously scaling back portions of its Amazon Fresh and Amazon Go footprint.
Our sources suggest that Amazon is looking to grow their Amazon Daily shops by up to five times its reported figures in the next year. We’ve long opined that Amazon has been testing store formats before a larger national roll-out. And while a larger 117,000 sq foot store is being built outside Chicago, that format will be harder in smaller cities and rural areas.
A host of shuttered pharmacies from CVS and the Rite Aid bankruptcy could provide the company with plenty of available real estate to quickly grab real estate and market share in its Daily Shop format. This rollout could also place additional pressure on regional grocers, convenience chains and drugstore operators already struggling with declining front-end traffic.
Smaller-format grocery stores positioned around prepared foods and rapid fulfillment increasingly blur the line between supermarket, convenience and e-commerce channels.
Amazon’s growing grocery ambitions reflect the scale of the opportunity – and the competitive pressure posed by Walmart, which remains the nation’s largest grocer with an estimated 30% share of the U.S. grocery market.
Amazon has increasingly positioned itself as one of the nation’s largest grocery retailers by combining online grocery, Whole Foods Market and delivery-driven sales metrics. Amazon has reported that it is the number two grocer behind Walmart. More than 150 million customers now shop for groceries through its platform annually with same-day grocery delivery service continuing to expand nationwide.
More importantly, grocery in Amazon’s case may be less about food sales and more about controlling last-mile consumer logistics. Frequent grocery trips provide Amazon with recurring customer engagement, delivery density and behavioral data that can strengthen its broader retail ecosystem far beyond food.
The strategy mirrors Walmart’s growing emphasis on omnichannel grocery fulfillment, where physical locations increasingly function as both retail stores and local delivery hubs. Amazon’s smaller-format strategy may rely less on conventional supermarket economics and more on ecosystem value tied to Prime retention, advertising, data and delivery density.
