Amazon, which is rethinking its global grocery strategy following the closure of Amazon Go and Amazon Fresh physical stores in the United States, has entered into a partnership with loss-making Australian retailer Harris Farm Markets.

The US online giant is positioning itself to challenge supermarket heavyweights Woolworths and Coles after striking a deal that allows Harris Farm to expand its reach as a premium food retailer—where items such as artisan bread can sell for as much as $10 a loaf.

Amazon Prime Australia managing director Arno Lenior said everyday essentials are now the company’s fastest-growing category locally, with sales rising 30 per cent year-on-year.

The Australian move comes as Amazon globally reassesses its food operations, having struggled to find a scalable and profitable grocery model. In a blog post released yesterday, Amazon acknowledged the challenge, saying: “While we’ve seen encouraging signals in our Amazon-branded physical grocery stores (US only), we haven’t yet created a truly distinctive customer experience with the right economic model needed for large-scale expansion in the food category.”

Amazonm’s Arno Lenoir

Industry observers are now questioning whether Amazon could eventually acquire Harris Farm, after US management recently indicated it was open to new operating models and new types of physical locations. One concept under consideration is a “supercentre” offering groceries, household goods and general merchandise under one roof.

For now, analysts say the Australian partnership appears to be primarily a logistics arrangement. Deliveries will initially be rolled out across inner Sydney, with Amazon Prime members receiving free delivery on orders over $100.

Harris Farm Markets co-chief executive Angus Harris has not indicated whether the deal will help improve the retailer’s financial performance, after the company reported a $10 million loss last year. Harris Farm currently operates 33 stores nationwide.

According to the Australian Financial Review, online sales now account for almost 11 per cent of the grocery market and have driven significant revenue growth at both Coles and Woolworths since the pandemic. In the first quarter of the current financial year, Coles reported online sales growth of 27.9 per cent to $1.32 billion, while overall revenue rose 4.8 per cent.

Investors and analysts say it was inevitable Amazon would target food and groceries after achieving strong growth in consumer electronics and appliances. Some estimates suggest Amazon now accounts for 22 per cent of Australia’s non-food online spend in 2025, supported by rapid expansion of its local distribution network.

Angus Harris said the agreement with Amazon would help Harris Farm compete with much larger rivals.

“The grocery market is a very large, very advanced market, and smaller players like Harris Farm can really benefit from teaming up with larger partners who have access to customers and distribution networks,” he said. “It’s like opening in a new shopping centre—you suddenly have access to more customers and can showcase our great fruit, vegetables and gourmet grocery items.”

Lenior said Amazon remained “super focused” on evolving customer expectations, citing demand for “more choice, more convenience, high-quality products and, ultimately, value.”