Behind the Numbers: an EMARKETER Podcast

Episode: Amazon’s Grocery Dilemma: Challenges, Missed Opportunities, and the Key Ingredient | Reimagining Retail
Date: December 3, 2025
Hosts & Contributors:

• Susie Dava Kenyon (Host, EMARKETER)
• Blake Droesch (Senior Analyst, New York City)
• Sky Canavas (Regular Contributor, Texas)

Episode Overview

This episode of Reimagining Retail dives into the challenges Amazon faces in the grocery sector, contrasting its e-commerce dominance with its ongoing struggles to gain a significant foothold in grocery retail—particularly in physical stores. The conversation is organized into three primary segments:

1. Diagnosis of Amazon’s Current Grocery Standing
2. Analysis of New Initiatives and Strategic Pivots
3. Speculation on What Might Move the Needle in 2026

Throughout, the analysts dissect Amazon’s recent moves—including the “Amazonification” of Whole Foods, new grocery private label branding, and ongoing store closures—while comparing these efforts to competitors like Walmart.

Key Discussion Points and Insights

1. Why Amazon Grocery Isn’t Working

[02:36-08:08]

• Lack of Sufficient Physical Stores:
  • Blake: “They just simply don't have enough stores. In grocery, having a brick and mortar footprint is really the recipe to success.” [02:36]
  • Sky: “About 500 Whole Foods stores and another 50 Fresh stores. Walmart has about 10 times as many stores.” [03:56]
• Whole Foods’ Mismatched Business Model:
  • Blake: “Whole Foods is basically a niche business model... and I just think that model doesn't fit Amazon's 'offer everything to everyone' ethos.” [03:15]
• Competition and Technology Investment:
  • Blake: “Walmart has invested in technology better than Amazon has invested in stores.” [03:38]
• Physical Retail Execution Issues:
  • Sky: “Amazon has struggled more broadly with developing physical retail, not just grocery… Other experiments in physical retail, like bookstores, clothing stores, have not resonated.” [04:35]
  • On Amazon Fresh: “There's something somewhat sterile about them. There's a lack of...creativity in the merchandising.” [05:02]
• Confusing and Fragmented Online Experience:
  • Sky: “Shopping online for groceries via Amazon is confusing and fragmented... you have Whole Foods and Fresh and now Prime Grocery Delivery... not possible to build a single cart.” [05:33]
• Delivery Fees and Customer Frustration:
  • Susie: “Is there something around customer confidence eroding... charge me for delivery, don’t charge me?” [06:10]
  • Sky: “Whole Foods has like a $10 delivery fee... Walmart has really simplified that. If you're a Walmart plus member, it's free over $35.” [06:44]

Consensus on the Biggest Weakness

• Fragmentation:
  • Susie: “Confusing banners and scaling approach is probably their biggest weakness.” [08:08]

2. New Amazon Grocery Initiatives: Analysis and Recommendations

[08:08-19:45]

a. Amazonification of Whole Foods (Micro-Fulfillment Stores)

• Description:
  • Amazon is piloting mini Amazon grocery shops inside Whole Foods, aiming to keep more customer spend within their ecosystem.
• Sky’s Take:
  • “It was very much like the grocery section of a CVS or Walgreens...messaging gets really mixed...didn’t see a lot of foot traffic.” [09:20]
  • Recommends: Tweak it by integrating it better with Whole Foods, broadening the product mix.
• Blake’s Take:
  • “I think it's gonna fail. I would shut it down...it's too small of a space...you can't do all of your grocery shopping in the aisles of a CVS or Walgreens.” [11:08]
  • Concerns about wasting valuable urban retail space.

b. Amazon Grocery Private Label Launch

• Description:
  • “Amazon Grocery,” a rebranding that merges Fresh and Happy Belly products, aiming for 1,000 items under $5 targeting cost-conscious shoppers.
• Blake:
  • “I would lean into it, but I would tweak it by getting rid of the name Amazon Grocery. It just sounds so unappetizing...” [14:07]
  • Stresses importance of private label but urges a “good, better, best” approach and better branding.
• Sky:
  • “It’s not so much a whole launch...more of a rebrand...fits in with a broader trend of private label grocery companies wanting to put their name more prominently on the product.” [15:09]
  • Sees value in bringing affordable, well-branded private labels to Whole Foods for wider customer appeal.
• Consensus:
  • Private label is an important move, but the branding needs finesse.

c. Ongoing Amazon Fresh Store Closures

• Description:
  • Amazon is closing Fresh stores, including all in the UK and five more in the US, signaling struggles with this format.
• Sky:
  • “It’s part of an ongoing evolution that's been very confusing and meandering...latest example... robotic micro fulfillment center ... is not going to really go anywhere.” [17:46]
  • Notes inconsistency/uncertainty in Amazon’s store strategy.
• Blake:
  • “I would say just close all the stores and focus on making delivery faster and cheaper...invest in unifying the fulfillment process.” [19:12]
  • Suggests leaning into e-commerce fulfillment over physical expansion.
• Sky:
  • Potentially turn Fresh locations into smaller Whole Foods stores. “Whole Foods business is still doing surprisingly well.” [19:45]

3. What Could Actually Move the Needle? (Looking Ahead to 2026)

[20:03-22:57]

• Blake:
  • Biggest Opportunity: “Make the same day perishable food delivery just available everywhere...continue focusing on e-commerce and serving Prime members.” [20:23]
• Sky:
  • Unifying the Shopping Cart: “The single grocery cart online...where you can get your Whole Foods and whatever you’d buy on Amazon—and it should be free delivery because that's what customers expect.” [21:20]
  • Emphasizes need for a truly seamless experience for Prime users.
• Susie:
  • Suggests a clear, tiered Amazon Prime Grocery program, akin to Prime Video’s approach, to simplify the value proposition. [22:25]

Notable Quotes & Memorable Moments

• On Store Footprint:
  • Blake: “In grocery, having a brick and mortar footprint is really the recipe to success.” [02:37]
• On Store Experience:
  • Sky: “There's something somewhat sterile about them. There's a lack of...creativity in the merchandising.” [05:02]
• On Delivery Fees:
  • Sky: “Whole Foods has like a $10 delivery fee...Walmart has really simplified that.” [06:44]
• On the Amazon/Whole Foods Identity Clash:
  • Sky: “Downstairs [in the Amazon grocery mini-store], there’s all the junk food. So the messaging gets really mixed. It’s convenient...but I didn't see a lot of foot traffic.” [09:20]
• On Private Label Branding:
  • Blake: “'Amazon Grocery' just sounds so unappetizing to me...take a page from other retailers that have rebranded under more attractive names.” [14:07]

Important Timestamps

• [00:53] - Introduction to the episode’s core question: Why can’t Amazon crack grocery?
• [02:36] - Panel discussion starts: What's not working for Amazon in grocery?
• [03:53] - Whole Foods’ niche model as a misfit for Amazon's ambitions.
• [05:33] - Fragmented online grocery experience explained.
• [06:44] - Delivery fees and confusing customer experience.
• [08:08] - Agreement on the biggest weakness: Confusing banners/approach.
• [09:20] - Experiences at a Chicago Amazon mini-grocery/Whole Foods hybrid.
• [14:07] - Private label discussion and branding critique.
• [17:46] - Summary of the Fresh store closure situation; ongoing confusion.
• [20:23] - Predictions for Amazon's next big grocery move.

Overall Tone & Takeaways

The discussion is candid and insightful, with touches of humor and skepticism, especially regarding Amazon's ever-evolving and often confusing grocery strategy. The analysts urge Amazon to simplify the customer experience, focus on what’s working (Prime delivery, Whole Foods’ strengths, and private label expansion), and establish a unified, recognizable, and value-driven grocery proposition if it wants to finally break through as a serious grocery player.