Amazon is embarking on a significant strategic realignment within its UK grocery operations, signaling a clear shift towards prioritizing online delivery services over its physical "Fresh" stores. This move comes as the global e-commerce behemoth observes a dramatic surge in digital grocery demand across the United Kingdom, prompting a reevaluation of its retail footprint.
The Rationale Behind the UK Grocery Shift
The decision to potentially close its UK Fresh stores is not arbitrary but a calculated response to evolving consumer behavior. Amazon announced a formal "consultation" process with its employees regarding the proposed closures, emphasizing that this step follows a thorough assessment of its current operations. The primary driver identified is the "very substantial" growth in online grocery delivery, a trend that has accelerated considerably. According to Amazon’s official blog, UK consumers are increasingly opting for digital channels to purchase groceries and essential household items.
This preference for online shopping is clearly reflected in Amazon UK's performance, where growth in the grocery category is reportedly outstripping other segments of its business. The company highlights that hundreds of millions of everyday essentials were delivered either the same or next day across the UK in 2024, marking an impressive increase of nearly 20% year-over-year. This robust growth in online fulfillment underscores the company's confidence in its digital model and its potential for further expansion.
Expanding Online Reach and Partnerships
In line with this strategic pivot, Amazon is actively working to enhance its online grocery selection and broaden its delivery services to encompass new geographical areas within the UK. A key objective for the company is to significantly expand access to its online grocery offerings for Prime members. By early 2026, Amazon aims to double the number of Prime members in the UK who can access three or more online grocery delivery options. This ambitious target will be achieved through strategic partnerships with established UK retailers such as Morrisons, Iceland, Co-op, and Gopuff. Through these collaborations, Amazon anticipates that over 80% of UK Prime members will have access to at least one of its partnered grocery services, dramatically increasing its market penetration and convenience for customers.
Further illustrating its evolving physical retail strategy, Amazon also plans to convert five of its existing Amazon Fresh locations into Whole Foods Markets. This move suggests a refinement of its brick-and-mortar presence, focusing on the more premium, established Whole Foods brand in select locations, while largely consolidating its mainstream grocery efforts online.
Contrasting US Grocery Dynamics: Amazon vs. Walmart
While Amazon reorganizes its UK grocery strategy around online delivery, the landscape in the United States presents a different narrative, particularly when viewed through the lens of traditional retail dominance. A recent PYMNTS Intelligence report titled "Amazon Extends Gains While Walmart Holds Steady in Q2 Spending" sheds light on the entrenched position of Walmart in the American grocery market.
As of the second quarter of the current year, Walmart commands a substantial 21% share of the American grocery market. This remarkable market share is largely underpinned by its extensive physical infrastructure, comprising more than 4,600 locations that strategically place 90% of the U.S. population within a 10-mile radius of a store. This widespread accessibility provides Walmart with a significant competitive advantage, particularly in a sector where physical presence and immediate gratification remain highly valued by consumers.
In stark contrast, despite billions of dollars invested in its grocery ventures, including the acquisition of Whole Foods and the establishment of Fresh stores, Amazon has experienced only a modest increase in its US grocery share, reaching just 2.7%. This represents a growth of less than 1 percentage point over a period of six years. This data highlights the inherent challenges Amazon faces in disrupting the highly competitive and deeply rooted grocery sector in the US, despite its formidable e-commerce engine.
PYMNTS Intelligence emphasizes that while Amazon's e-commerce capabilities continue to revolutionize other retail categories, it encounters significant headwinds in grocery. The report points out that factors such as instant access, convenient curbside pickup, and the prevalence of impulse buying continue to favor Walmart's robust brick-and-mortar network. Further research from PYMNTS Intelligence reinforces this point, indicating that a substantial 88% of U.S. grocery shoppers still express a preference for in-store shopping over online alternatives. This underscores a persistent consumer attachment to the physical shopping experience, even as digital retail gains traction in other market segments.
The report concludes that Walmart's expansive physical store network is a pivotal factor in its sustained position as the leading grocery destination. Its broad reach combined with competitively priced perishables provides the supercenter chain with an undeniable edge. Even as Amazon diligently refines its urban-centric delivery models and premium strategies, the majority of shoppers continue to gravitate towards grocery options where the traditional experience of aisle browsing and immediate product fulfillment is readily available. This divergence in market dynamics between the UK and US grocery sectors underscores the complex and varied challenges faced by global retailers as they navigate the evolving preferences of consumers in different regions.
