The e-commerce giant tackles a difficult new market but might just be able to make it successful.
The Seattle-based e-retailer has been quietly testing their online grocery business for years, and now it seems they are ready to start rolling out the service in cities outside their home territory.
Food and groceries are some of the largest retail sectors yet to be dominated by Internet-based businesses, in part due to the low margins and issues of freshness. Amazon could deal with this by combining orders for higher-margin goods such as electronics with grocery orders, offsetting costs.
The company’s logistical network is one of their biggest strengths, so their warehouses could easily accomodate refrigerated storage space alongside general merchandise. They already have their own fleet of trucks that has been used to deliver grocery products in Seattle.
Initial plans are to offer grocery delivery in Los Angeles, followed by the San Francisco Bay Area later this year. Depending on the success of these new locations, the company could expand to 20 other urban areas in 2014 – some of which may even be international.
The implications of Amazon’s success with groceries could be far reaching. Their ability to make a profit from higher-margin items alongside grocery deliveries could pose a threat to stores such as Kroger and Whole Foods. At the same time it could give Amazon the impetus to develop their own fleet of delivery vehicles, threatening companies such as UPS and FedEx.