Amazon's Kobe project combines AI-powered automation with a Walmart-style flagship store; first location planned for 2027.

Amazon is pursuing an ambitious strategy called “Project Kobe,” aiming to combine a Walmart-style supercenter with robot- and AI-powered automated warehouses. The initiative is designed to expand Amazon’s physical retail footprint while reshaping how stores operate in the digital era.

From supercenter to automated fulfillment

Unlike traditional retail models, Kobe is intended to integrate the full shopping journey within a single location, covering in-store picking, pickup, and delivery. The approach reflects Amazon’s goal to compete directly with Walmart and potentially surpass it through technology.

Amazon describes the “flagship center model” it is testing as a way to offer customers a wide selection of high-quality products at strong value, including fresh foods, household essentials, and general merchandise in one trip.

Scale and warehouse design

The Kobe stores are planned at about 225,000 square feet, similar in size to large existing supercenters. However, the interior layout differs: roughly half of the space is dedicated to warehousing and order fulfillment.

At the core of the automated storage system is AutoStore, a robot-based solution designed for high-density storage. Robots retrieve and move goods to support faster order processing while optimizing space usage.

Amazon is also developing an internal system called Orbital, which it says could handle regular goods, frozen goods, and chilled items within a single automated system. If deployed, Orbital would reduce operational complexity and improve efficiency.

Automation supported by human work

Even with high automation, Kobe is not designed to eliminate human labor. Bulky items and fresh foods are expected to be handled manually, indicating that robots and AI are intended to assist operations rather than fully replace people.

The first Kobe location in Orland Park is expected to open by the end of 2027, according to prior statements.

AI for merchandising and operations

A notable element of Kobe is the use of AI to determine product categories for each store. Managers would input strategic goals, while the system would suggest suitable products based on data—reducing manual work and aiming to improve merchandising accuracy.

Amazon is also developing an internal AI assistant called Frida to support decision-making and optimize processes. The system is still under development and not yet fully refined.

Cost and competitive context

Amazon’s grocery presence remains limited compared with Walmart. Amazon has about a 3% market share in the US grocery market, while Walmart holds about 21%. Walmart’s extensive store network also supports fast delivery, reaching 93% of households.

Running an AI-powered model is expected to involve high costs and operational challenges. Kobe is projected to be more expensive than current systems, with fulfillment costs estimated at about 12% higher than the current fast-delivery network—particularly due to groceries and the need for cold storage.

Initial store investments could reach $33 million per location. Scaling the model across multiple sites could create financial and efficiency pressures, and demand surges in large markets could overload systems, especially for cold-storage items.

Potential impact

Project Kobe is positioned as a key effort to close the gap with Walmart. If successful, the model could be expanded to dozens or hundreds of stores in the future, potentially influencing the direction of global retail.

Source: Business Insider