Amazon getting into grocery business
Will sell and deliver fresh produce, meat and other foodstuffs in select cities, news agency reports
Reuters news agency is reporting that the online retailing giant Amazon is getting into the grocery business.
Amazon has been testing a grocery delivery service called AmazonFresh in Seattle for at least five years, two people familiar with the company's plans but not authorized to speak about them told Reuters. The service employs Amazon's own fleet of trucks to deliver fresh food products such as fruit, eggs and meat to customers who order the groceries online.
The online retailer, which started out selling books but now sells everything from electronics to clothing, plans to expand the grocery service to Los Angeles possibly as early as this week and to the San Francisco area later this year, Reuters reported.
Could expand to 20 cities in 2014
In the U.S., Amazon already sells some non-perishable food items in the grocery and gourmet food section of its website, but the new service would offer fresh food and produce and use Amazon's own trucks to make the deliveries, as opposed to the postal and courier services currently used to ship items.
If the service is successful, Amazon might expand it to 20 other cities in and outside the U.S. next year, one of the company sources told Reuters.
The grocery business in the U.S. had about $600 billion in sales last year. Operating revenue in Canada's grocery sector was about $82 billion in 2011, according to Statistics Canada.
On both sides of the border, smaller players are already being squeezed out not just by large grocery chains like Whole Foods and Safeway but by large retail chains like Wal-Mart which sell all manner of goods and have also gotten into the grocery business.
Amazon's new venture could cut into the profits of both small and large players, as well as the delivery companies that ship goods for Amazon.
Grocery stores increasing online offerings
To date, online grocers have not had huge success. One of the first such sites, HomeGrocer.com, was a product of the dot-com boom, but it flamed out soon after it was bought by Webvan in 2000.
Since then, a range of sites, such as FreshDirect.com and Netgrocer.com in the U.S. and Spud.ca in Canada, have also tried to break into the business — although these are often limited to certain geographic regions or specialty products.
Grocery stores themselves, including large chains like Safeway and Wal-Mart and smaller stores like Longo's, the Toronto grocery store that operates GroceryGateway.com, have also begun allowing their customers to shop remotely through their store websites.
AmazonFresh would be just the latest expansion of Amazon's increasingly diverse services. It continues to expand its stable of e-readers and tablets and has been beefing up its video streaming services, announcing plans for a set-top box for TVs and the creation of several original series. It has also continued to invest heavily in the data centres and IT infrastructure that make up Amazon Web Services, which provides cloud computing and other IT services to businesses.
Amazon's growing ambition has so far had the support of investors. Its share price rose almost 40 per cent in the 12 months to April 2013. Amazon stock was down slightly Tuesday, closing at $265.70 US on the Nasdaq.