The Thirty Billion Dollar Gap in Market Dominance
Amazon wants your weekly milk run. Andy Jassy confirmed this during the Q2 2025 earnings call, explicitly stating the goal to become a top three player in the U.S. grocery sector. The numbers suggest an uphill climb. Currently, Walmart controls approximately 26 percent of the U.S. grocery market, followed by a combined Kroger-Albertsons entity hovering near 16 percent. Amazon, including Whole Foods and Amazon Fresh, remains stalled at roughly 3.8 percent of total market share. To displace Costco for the number three spot, Amazon must bridge a revenue gap exceeding $35 billion in annual grocery sales. This is not a software update. This is a massive capital expenditure challenge requiring physical footprint expansion that the company has yet to execute at scale.
The Unified Cart Experiment and Q3 2025 Projections
Investors are scrutinizing the October 30, 2025, Q3 earnings release for signs that the unified cart initiative is moving the needle. This program allows customers to buy Whole Foods staples, Amazon Fresh perishables, and Amazon.com household goods in a single transaction. According to Bloomberg retail analysis, early data from the mid-2025 pilot program showed a 12 percent increase in basket size for Prime members. However, the cost of fulfillment remains a drag on the North American segment operating margin, which analysts expect to land between 5.6 and 5.9 percent for the quarter. The logistics of cold-chain delivery at the speed of Prime is a margin killer that Jassy has yet to solve.
Physical Footprint Constraints and the Fresh Redesign
The 2024 to 2025 redesign of Amazon Fresh stores focused on a more traditional grocery feel, moving away from the sterile, tech-heavy atmosphere of the early Just Walk Out era. While the company added 15 new locations in the first half of 2025, it still operates fewer than 60 Fresh stores nationwide. Compare this to Walmart’s 4,700 locations or Kroger’s 2,700 stores. Per the latest SEC 10-Q filings, Amazon’s physical store sales grew only 4.2 percent year over year in the previous period. This growth reflects price inflation more than organic volume increases. Without a massive acquisition or a 500 percent increase in store openings, the top three goal remains a mathematical improbability for the current decade.
The Logistics of Perishables vs. General Merchandise
Inventory turnover for grocery is significantly higher than for the consumer electronics or apparel sectors where Amazon dominates. Grocery retail operates on razor-thin margins, often between 1 and 3 percent net. Amazon’s strategy relies on the Prime subscription as a moat, but Reuters market reports indicate that consumers are increasingly split-shopping, using Amazon for shelf-stable goods while returning to physical discounters like Aldi or Walmart for fresh produce and meat. The technical mechanism of Amazon’s failure in the early 2020s was an over-reliance on automated picking for soft fruits and vegetables, which led to high waste (shrink) rates. The 2025 pivot to manual picking in local fulfillment centers has improved quality but spiked labor costs.
Inventory Management and the Shrink Factor
Shrinkage, the loss of inventory due to theft or spoilage, remains a critical metric for Jassy’s team. In the 2025 retail environment, industry-wide shrink has climbed to 2.1 percent of sales. Amazon Fresh stores have reported slightly higher figures due to the complexities of their automated checkout systems, which sometimes struggle with weighted produce. To hit the top three, Amazon must reduce grocery shrink by 40 basis points to align with Costco’s efficiency. The upcoming Q4 holiday season will be the first true test of the integrated distribution network, which now shares warehouse space between Amazon Fresh and the broader e-commerce division.
Revenue Per Square Foot Disparity
Efficiency metrics tell the most objective story. Whole Foods leads the industry in revenue per square foot at approximately $1,000. However, the Amazon Fresh stores are estimated to be generating less than $400 per square foot, significantly below the $600 average of a standard Kroger. The strategy to move down-market from Whole Foods’ affluent demographic into the mass-market Fresh territory requires a level of operational discipline in low-margin environments that Amazon has not yet mastered. The company is betting that its data advantage, knowing what a customer buys on Amazon.com, will allow for hyper-local inventory optimization that traditional grocers cannot match.
Watch the November 2025 federal court ruling on the Kroger-Albertsons merger. If the merger is blocked, the path to the number three spot becomes slightly less congested for Amazon. If the merger proceeds, Jassy will be competing against a consolidated giant with 5,000 stores and a combined procurement power that could force Amazon to overpay for inventory for the next 24 months.
