Amazon Bets Big on Physical Grocery Stores to Rival Walmart

Retail giant's latest move is a 225,000-square-foot mega-store to compete with big-box rivals

Published on Feb. 4, 2026

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Amazon, once the e-commerce upstart, is now doubling down on physical grocery stores in a bid to compete with retail giant Walmart. The company plans to open a massive 225,000-square-foot store outside Chicago, its largest physical location yet, that will sell produce, household goods, and general merchandise while also serving as a distribution hub for same-day deliveries. This shift in strategy comes as Amazon looks to capture more of the lucrative grocery market and leverage its physical footprint to save on last-mile delivery costs, a key advantage Walmart currently enjoys.

Why it matters

Amazon's move into large-scale physical grocery stores represents a significant shift in the company's strategy as it seeks to better compete with Walmart's massive retail footprint and delivery capabilities. The battle for grocery market share has intensified, with both companies vying to provide customers with convenient shopping experiences and fast delivery options.

The details

Amazon's previous efforts to crack the grocery market, including Amazon Fresh and Amazon Go, have failed to create a distinctive shopping experience that would allow for large-scale expansion. The company's decision to close those locations and convert them into Whole Foods Market stores signals a change in approach. The planned 225,000-square-foot mega-store outside Chicago will be Amazon's largest physical retail location yet, designed to compete directly with Walmart and Costco by offering a wide range of products, from produce to household essentials.

  • In February 2026, Amazon reported its fourth-quarter physical store revenue, which includes Whole Foods, Amazon Fresh and Amazon Go sales, increased 5.4% from a year ago to $5.9 billion.
  • Last month, Amazon announced it would close all of its Amazon Fresh and Amazon Go locations and convert them into Whole Foods Market stores.

The players

Amazon

An American multinational technology company that focuses on e-commerce, cloud computing, digital streaming, and artificial intelligence.

Walmart

An American multinational retail corporation that operates a chain of hypermarkets, discount department stores, and grocery stores.

Martin Heubel

An Amazon seller consultant whose clients send merchandise directly to Amazon to be sold in stores and online.

Bea Chiem

An analyst at S&P Global.

Asit Sharma

A senior investment analyst at financial services firm The Motley Fool.

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What they’re saying

“Amazon knows that it needs to win in grocery because shoppers that tend to buy grocery and fast-moving consumer goods items tend to have the highest customer lifetime value.”

— Martin Heubel, Amazon seller consultant

“I think to go all-in on brick-and-mortar is probably not the long-term strategy for Amazon. It's going to take some time for them to catch up.”

— Bea Chiem, Analyst (S&P Global)

“Amazon would love to also play in a world where customers come into a store and take care of that last-mile problem by themselves.”

— Asit Sharma, Senior investment analyst (The Motley Fool)

What’s next

Amazon's planned 225,000-square-foot mega-store outside Chicago is expected to open in the coming year, marking a significant expansion of the company's physical retail footprint as it seeks to better compete with Walmart's extensive store network.

The takeaway

Amazon's shift towards larger, more traditional brick-and-mortar grocery stores represents a strategic pivot for the company as it looks to capture a greater share of the lucrative grocery market and leverage its physical presence to improve delivery efficiency. This move signals Amazon's recognition that it needs a stronger physical retail presence to truly compete with retail giants like Walmart.