Amazon gets fresh with an expanded grocery service
Amazon.com is expanding its online grocery business to include fresh meat, produce and other perishables. Though the world’s biggest online retailer is remaining low-key and limiting its new program, Amazon Fresh, to a pilot in suburban Seattle, industry analysts see the move as significant.
“Amazon has the brand name and the business base to make an impact as a national online grocer,” says Jon Hauptman, a partner with food retailing consulting firm Willard Bishop. “What they are doing with this pilot looks a lot like the business model FreshDirect successfully implemented in New York. The key is staying local.”
In June 2006 Amazon launched a grocery section that includes 12 categories of nonperishable goods such as cereal, pasta and canned soup. The category also includes merchandise from a variety of well known consumer brand manufacturers such as Kraft, Kellogg and Betty Crocker.
Now Amazon, No. 1 in the Internet Retailer Top 500 Guide, is implementing Amazon Fresh on an invitation-only basis on Mercer Island, a trendy and affluent suburb that is in close proximity to Amazon’s Seattle distribution center.
Amazon has quietly put up a micro site – Fresh.Amazon.com – which features locally grown fresh fruits and vegetables, the retailer’s full range of non-perishable items and various organic products. Fresh.Amazon.com is also promising regular and pre-dawn delivery of perishables in temperature-controlled totes to the customer’s home or designated pick-up location.
Amazon isn’t saying much about its move into the perishables food delivery business, but a link and a footnote at the bottom of Fresh.Amazon.com invites customers to fill out a form to “help us figure out where to expand next.”
Amazon is using its own delivery vehicles for the Mercer Island pilot. Today online grocers such as FreshDirect LLC, No. 57 in the Internet Retailer Top 500 Guide, and Peapod LLC, No. 43 in the Internet Retailer Top 500 Guide, have built national or regional market share—FreshDirect services just the New York City area—by investing millions of dollars in refrigeration systems and fleets of refrigerated delivery vehicles that can take advantage of a local supply chain.
For Amazon to succeed as a national online grocer, they will need to invest heavily in local suppliers and refrigeration, says Hauptman. “They appear to be going about this the right way, which is neighborhood by neighborhood,” says Hauptman. “They have the Amazon brand and what they are developing now is the expertise to look like a FreshDirect.”
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