Inside Project Kobe: Amazon's plan to build Walmart-style supercenters powered by warehouse robots and AI

• Amazon's Project Kobe aims to blend supercenters with warehouses in a new retail strategy.
• The Orland Park location is Amazon's first Kobe store, with many more planned.
• Amazon's new supercenters will use AI and robotics, but higher costs and complexities are expected.

Amazon is moving deeper into Walmart's territory with a new kind of supercenter. Internal documents show how that strategy is taking shape.

The e-commerce giant is planning to build a number of large-format stores that combine a Walmart-style supercenter with a robotics-powered warehouse, including previously unreported locations, according to internal documents obtained by Business Insider.

The effort, known internally as Project Kobe, is one of Amazon's most ambitious attempts yet to remake physical retail. The stores combine grocery and general merchandise with an automated fulfillment center embedded in the back, designed to handle in-store shopping, pickup, and delivery from the same building.

The concept also relies on AI-driven tools to help determine what each store should carry, though overall costs are expected to be higher than existing operations.

The push follows years of uneven results in Amazon's grocery and physical retail businesses, including the recent shutdown of its Go and Fresh store networks. The company's $13.7 billion acquisition of Whole Foods has also yet to significantly expand its share of the US grocery market.

An Amazon spokesperson told Business Insider that the concept for these stores are still in "early development."

"The new supercenter concept we are testing will make it convenient for customers to shop a broad selection of quality products at great value across fresh groceries, household essentials, and general merchandise — all in one trip," the spokesperson said. "Like any new format, the details will continue to evolve as we build a concept that works best for customers and our business."

Higher costs, big aspirations

Amazon's plans for its first Kobe store, in Orland Park just outside Chicago, were made public earlier this year. Internal documents show the company is advancing additional sites in Cherry Hill and Edison, New Jersey, as well as Oak Brook, Illinois.

The documents also reference longer-term plans to potentially open dozens of stores, or even more, if the early pilots prove successful.

At roughly 225,000 square feet, Kobe stores resemble Walmart Supercenters on the surface, combining grocery and general merchandise under one roof. But inside, they function very differently.

Each location embeds fulfillment as a core piece of the store, rather than treating it as an add-on, with a large portion of the building dedicated to automated storage, picking, and packaging.

In January, Amazon told the Orland Park Plan Commission that roughly 100,000 square feet, or about half the building, would be dedicated to warehouse space. That's far larger than the roughly 18,000 to 36,000 square feet Walmart is typically estimated to use for fulfillment in the back of its stores, according to Linwei Xin, an associate professor at Cornell University who specializes in supply chain management.

"To my knowledge, there is no clear precedent," Xin told Business Insider.

Amazon's Kobe stores are also projected to carry significantly more products than a typical Walmart supercenter. One internal document estimates that about 250,000 items will be displayed or stored at the facilities, nearly double the amount carried by most Walmart stores.

"The Amazon proposal calls for a larger-scale integrated retail and online order fulfillment solution," Marc Wulfraat, president of logistics consultancy MWPVL, told Business Insider.

Tradeoffs

That kind of scale comes with tradeoffs.

The Kobe format carries higher operating costs than comparable fulfillment systems Amazon already runs, according to internal projections. Each item is estimated to cost about 12% more to fulfill than Amazon's sub-same-day network (typically 4 hours or faster deliveries), and significantly more than at highly automated facilities.

Perishable grocery is a major driver of those costs. The documents estimate those orders could cost almost $2 per unit, or roughly 10% more than Amazon's sub-same-day deliveries. That's primarily because many items are still picked from the sales floor, requiring workers to walk more than 500 feet to retrieve products and bring them back to the fulfillment area.

In total, the proposed site in Orland Park is estimated to need $33 million in capital expenditure, one of the documents stated.

Those inefficiencies could become more challenging as Amazon scales the model to higher-volume markets where grocery demand is estimated to more than triple, according to the documents.

Future sites are expected to shift more grocery inventory to the back of the facility to reduce sales floor congestion. That could introduce new constraints around refrigeration and warehouse space, the documents added.

Robots power the back of the store

Amazon's push into large-format stores comes as it continues to lag Walmart in grocery.

Despite surpassing Walmart in annual revenue last year, Amazon holds just 3% of the US grocery market, compared with Walmart's 21%, according to Numerator. Walmart also has one key advantage in delivery, as the location of its many supercenters means it can reach 93% of households with same-day service. (The Amazon spokesperson said Numerator data underrepresents Amazon's grocery share).

Project Kobe is one of the highest-profile initiatives under Amazon's grocery chief Jason Buechel, who also serves as CEO of Whole Foods. Since taking on the role last year, Buechel has focused on reshaping Amazon's grocery operations and more closely integrating them with Whole Foods.

Inside Amazon, the Kobe project has been closely guarded. Roughly 50 employees across Seattle, New York, and Austin are directly involved in the initiative, according to people familiar with the matter, and planning documents are tightly restricted.

At the core of the Kobe store's warehouse is a robotic storage system from AutoStore, a warehouse-automation company, according to the documents. The system uses a grid of stacked bins, with robots moving across the top to retrieve items.

Amazon selected AutoStore in part for its storage density, which allows large amounts of inventory to fit within a constrained footprint. As grocery volume grows, more space inside each store must be dedicated to staging and order handling, leaving less room for automation. AutoStore's spokesperson didn't respond to a request for comment.

At the same time, Amazon is developing a new in-house system, known internally as Orbital, Business Insider previously reported. The system is designed to handle ambient, chilled, and frozen goods within a single, smaller-footprint automated setup. Orbital could be used at future Kobe sites, but it is about two years away from launch, according to the documents.

Manual work remains

Even with heavy automation, the stores will still rely on manual work. Bulkier, non-sortable items are expected to be handled through a two-level picking system, while fresh groceries are often picked directly from the sales floor.

A single order may require items from multiple store locations, including manual shelving, refrigerated cases, and high-demand "premium" sections, all of which must be consolidated within tight time windows.

The first Kobe location in Orland Park is expected to open in late 2027, Amazon has previously said.

AI helps decide what the store sells

Behind the Kobe model, Amazon is building an AI layer to help determine what each store should carry.

The company is developing AI-driven tools that allow category managers to input strategic goals, such as expanding certain product categories, while models generate recommendations based on demand and space constraints, the documents showed.

The AI system, powered by internal optimization models and a custom AI assistant known as Frida, is designed to reduce manual planning and scale decisions across the stores. Amazon plans to continue this shift from a highly curated, human-led experience to a fully automated, model-driven selection process, according to the documents.

But the system isn't ready yet. One of the documents noted Amazon is not at the "North Star," highlighting how much remains unproven.

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