SEATTLE – Amazon.com yesterday began offering fresh grocery
delivery to Los Angeles, the first expansion beyond its test run in Seattle,
the Wall Street Journal reports.
The expansion for Amazon of its AmazonFresh business is
thought to be the beginning of a broader expansion. It has been running the
business in Seattle, it’s hometown, for nearly six years. The service offers
home delivery of produce, dairy, meat and groceries within one- or three-hour
windows.
The Wall Street Journal speculated that the expansion poses
risks for Amazon, though it conceded that the online retailer “has demonstrated
a willingness to lose money on new ventures to gain a foothold.”
At the company’s annual shareholders meeting last month,
Amazon CEO Jeff Bezos acknowledged the service has yet to make money. "They
have made progress on the economics over the last year," he said in
response to a question about the division.
Industry insiders said if anyone can make the venture
profitable, it is Amazon.
"The concept of delivering everything to your doorstep
is back to the past," said Fiona Dias, chief strategy officer for e-commerce
site ShopRunner. "If Amazon can bundle low-margin groceries and other
high-margin Amazon items, it could make the economics much more
compelling."
Indeed, in Seattle, Amazon customers can combine their apple
and butter orders with 100,000 Amazon items including video games, toilet paper
and motor oil.
Many AmazonFresh items can be delivered the same day they
are ordered. Suppliers who participate in the program have noted a substantial
sales lift.
Chris Porter, owner of A La Mode Pies in Seattle, said he
was selling more Mexican chocolate mousse and strawberry rhubarb confections, a
result of an AmazonFresh program offering delivery of prepared foods from
restaurants, bakeries and other small businesses. "It's been great for my
business," Porter said.
Amazon keeps about $2 of every $9 pie Porter sells, he said.
Other vendors said the percentage can be as high 40% of the sales price.
"It's a very efficient operation," Porter said.
"I am not sure it could work, but if they expanded nationally, I'd love to
be a part of that."