Amazon, once seen as the nimble disruptor racing ahead of Walmart with its online only model, is now placing a renewed bet on large physical retail stores traditionally associated with its long time rival. Analysts expect Amazon’s fourth quarter physical store revenue, which includes sales from Whole Foods, Amazon Fresh and Amazon Go, to rise 5.4 percent year on year to 5.9 billion dollars, with overall earnings projected at 1.97 dollars per share when results are released.
While Amazon Web Services continues to grow rapidly and now accounts for about 18 percent of total revenue, retail remains central to the company’s strategy. This was underscored by its recent decision to close all Amazon Fresh and Amazon Go outlets and convert them into Whole Foods Market stores, signalling a shift away from earlier experiments toward a more focused brick and mortar approach anchored on its grocery business.
The company’s boldest move yet is the planned opening of a 225,000 square foot mega store outside Chicago, its first of this kind, designed to compete directly with Walmart and Costco. The store will sell groceries, household essentials and general merchandise while also doubling as a distribution hub for same day deliveries, a model analysts say could help Amazon increase customer lifetime value by capturing frequent grocery shoppers.
Still, experts caution that the pivot will take time to yield results, especially as Walmart continues to benefit from its vast physical footprint and a fast growing e commerce arm powered by Walmart Plus. With more than 4,600 stores across the United States and most consumers living within a short distance of one, Walmart retains a last mile delivery advantage that Amazon is only beginning to build, making the battle for dominance in physical retail far from settled.