NEW YORK, Feb 4 (Reuters) - Amazon ( AMZN ) was once the upstart running ahead of Walmart ( WMT ) with its revolutionary e-commerce business. It now finds itself betting on the kind of mega-store typically associated with its Bentonville, Arkansas, rival. 

Analysts expect Amazon's ( AMZN ) fourth-quarter physical store revenue, which includes Whole Foods, Amazon Fresh and Amazon Go sales, to increase 5.4% from a year ago to $5.9 billion when it reports results ‌on Thursday, according to estimates from LSEG. Overall earnings are expected at $1.97 a share.

The company's retail operations are still a key part of the business, even ​as it sees fast growth from its technology division, Amazon Web Services, which accounts for 18% of its ‍revenue. Its decision last month to close all of its Amazon Fresh and Amazon ( AMZN ) ⁠Go locations and convert them ⁠into Whole Foods Market stores was a signal of a changing strategy.

Its newest bet is a 225,000-square-foot mega-store outside Chicago, its first ever, meant to ‌compete with Walmart ( WMT ) or Costco. The planned store will sell ​produce, household essentials and general merchandise while also serving as a distribution center for same-day deliveries.  

"Amazon ( AMZN ) 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," said Amazon ( AMZN ) seller consultant Martin Heubel, whose clients send merchandise directly to Amazon ( AMZN ) to be sold in stores and online.

The company said its previous strategy failed to create a distinctive shopping experience that ‍would allow for large-scale expansion. Amazon ( AMZN ) did not comment.  

"I think to go all-in on brick-and-mortar is probably not the long-term strategy for Amazon ( AMZN )," S&P Global analyst Bea Chiem said. "It's going to take some time for them to catch up."

WALMART'S ( WMT ) FOOTPRINT

Walmart ( WMT ) lagged behind Amazon ( AMZN ) in e-commerce for years, but the introduction of its Walmart+ membership program in September 2020 turned the tide. The program had 26.5 million members as of 2025, according to Morgan Stanley research, and its ​e-commerce sales ‍are still growing, with a 28% increase in its most recent quarter from the year-ago period.

Walmart's ( WMT ) advantage stems in part from a massive physical footprint of 4,600 stores that fulfill pick-up orders and ​same-day deliveries. ​The company says that 90% of the U.S. population lives within 10 miles (16.1 km) of one of its stores. This helps the retailer save on last-mile delivery costs - a benefit that Amazon ( AMZN ) would like to achieve, said Asit Sharma, senior investment analyst at financial services firm The Motley Fool.

Walmart ( WMT ) posted $177.8 billion in retail sales in the third quarter, while Amazon's ( AMZN ) combined online and physical store sales were nearly $80 billion. Walmart ( WMT ) did not comment.

Amazon ( AMZN ) has pursued a physical footprint since it opened its first Amazon Go ​store in 2016, followed by its $13.7 billion acquisition of Whole Foods Market in 2017 and its 2020 introduction of Amazon Fresh. Only Whole Foods appears set to survive the reorganization.

"Amazon ( AMZN ) would love to also play in a world where customers come into a store and take care of ‍that last-mile problem by themselves," Sharma said.