Will Amazon shutter supermarkets?

Right now, you can use the site's grocery service only in Seattle and LA, but look out if it expands.

By TheStreet Staff Aug 19, 2013 12:11PM

thestreet logoAmazon.com logo © Spencer Platt/Getty ImagesBy Rocco Pendola

 

I live less than a block from a Safeway (SWY) grocery store and a stone's throw from three Whole Foods Market (WFM) locations.


However, over the weekend, I used Amazon.com (AMZN) to conduct the bulk of our weekly grocery shopping.


As I explained earlier this month, after a lengthy trial in the Seattle area, Amazon has made Fresh grocery service available throughout large swaths of the Los Angeles area (TheStreet). That includes my zip code -- and others -- in Santa Monica.

 

"Fresh" works as part of your "Prime" membership. After a free three-month trial, you agree to pay $299 a year for Prime -- as opposed to the current rate of $79 -- and you receive free delivery on all Amazon Fresh orders greater than $35.

 

As I expected, Amazon Fresh delivers the same quality experience we have come to expect from the traditional Amazon ordering process. Efficient. Speedy. Well-executed. And it absolutely competes on price.

 

I probably don't look at price tags as much as I should, but it appeared to me that everything we ordered was priced the same as, or less than, what we pay at Safeway. And almost always less -- no surprise -- than what we pay at Whole Foods. I don't routinely buy groceries at Target (TGT) and never go to Walmart (WMT), but I presume Amazon is in their ballpark.

 

My wife commented that what we got a lot more for the $55 or so we paid Amazon than she did on a quick weekend trip to Safeway where she dropped $47. Plus, you also get a bunch of free bottled water, which leads to my only gripe with Amazon Fresh.

 

I chose "Doorstep Delivery," which means the driver leaves your order at your door. To ensure everything arrives and stays fresh, Amazon loads collapsable styrofoam containers with frozen bottles of water (safe to drink) and, in one instance, a bit of dry ice. That makes for a lengthy unloading process. Plus, I have to store two of the bags, bulked up with the styrofoam, in my small apartment until the next delivery.

 

I assume -- and hope -- if I opt for "Attended Delivery," meaning the driver knocks on my door and I must be present to accept the order, there will be less packing material. Seems to me milk, produce and the like can survive just fine in insulated bags using this method. But I don't know how long the distribution process takes, so we'll see.

 

But this much is certain, I can see myself using Fresh on a regular basis. Probably weekly. I won't stop going to Safeway (it's convenient), Whole Foods or Trader Joe's (they both have items Amazon doesn't and provide fairly good brick-and-mortar experiences), but each store will receive less money from me. This process is not at all dissimilar to what has happened between Amazon and bookstores, electronics retailers and much of the rest of physical retail.

 

And Amazon is smart. Jeff Bezos obviously learned from Webvan's experience. While Webvan probably would have died anyway (it didn't have the scale or ability to subsidize the grocery business like Amazon does), it tried to expand way too fast for its own good (not all that different from Netflix (NFLX)).

 

So Amazon will continue its move into groceries slowly. It will develop best practices to get customers to include something other than groceries -- or high-margin grocery items -- with their Fresh orders. And over time, as the program expands, Amazon might just eat away at the revenue of traditional grocers and the superstores, stealing just enough business from each to make it one of the, if not the, dominant player in the space.

 

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16Comments
Aug 19, 2013 1:54PM
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The grocers in our area all offer free delivery if your order is over $100. Plus I can get more locally-sourced foods from them than I can from Amazon, so I wouldn't shell out the extra $200+ for Amazon grocery delivery.
Aug 19, 2013 3:51PM
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I like to look at the food I buy like bacon, other meats and fresh vegetables and not let someone just gab anything and just throw it in a bag.
Aug 19, 2013 3:38PM
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He compares the expansion of Webvan - which delivered tangible goods and therefor needed trucks and warehouses and such - with the expansion of Netflix.  If that doesn't make you wonder about his analytical skills, nothing I can say will
Aug 19, 2013 4:04PM
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I like Amazon, but it sounds cumbersome to me.
Aug 19, 2013 2:23PM
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The drop box was the ultimate tool WebVan was missing.  Everyone wanted their delivery between 6-8.  It took too much planning on the customer's part.  I didn't like the commitment that I would have to be home at a certain time.  IT was easier to run into the grocery store.
Aug 19, 2013 3:19PM
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You've got to be kidding right ??

All I see is no accountability of the products being sold....Age, source, etc.

 

There are grocers today that will deliver for small fee, sometimes only tips.

Probably depends on amount(spent/cost) of delivery...And distance.

It was quite common years ago, such as pizza delivery today.

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Another big greedy,money- grubber US corporation attempting to monopolize the grocery stores' industry.I don't do business with Amazon,and I'd rather support the small businesses in the Greater Seattle area.I buy my grubs from Red Apple Markets,a family owned business in Greater Seattle.
Aug 19, 2013 3:26PM
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Anybody remember WebVan and HomeGrocer.com?
Aug 19, 2013 3:31PM
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This would be a nice convenience.  I already buy some groceries (in bulk and on subscribe and save plan )through Amazon and have been pleasantly pleased with the service and convenience.  Cost is also less than in the very few markets we have available within a 25 mile radius of my home.  I would love to have this delivery of groceries available in our area.
Aug 19, 2013 5:51PM
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Ok, first question is how do they deliver?  By bicycle?  $299. for a year worth of deliveries at todays gas prices is a losing propisition.  Let's see what happens when they try to expand to those Nothern States in the winter.  Would really like to see them ride those bike when the wind chill is zero or below.
Aug 19, 2013 6:21PM
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Look up the story behind WebVan. That billion dollar dot bomb proved that the only way that this would be feasible was with a low cost distribution network and delivery costs passed through to the customer. If Amazon can set a minimum order and limit the weight and bulk of the items, without the customers paying additional charges, it could work. Finding "local" produce items may become the bigger issue.
Aug 19, 2013 5:58PM
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I love Amazon Fresh - I don't pay for the membership for free delivery because I only use it once in a while and the delivery charge really isn't that much. It has come in handy for those times when I knew I was short on time and needed the convenience of a same day delivery.  I can order groceries in the morning before work and find them on my porch when I get home in the evening.  The product always looks good, if you need a ripe avocado, you can specifically order a ripe avocado...and you will actually get a ripe avocado
Aug 19, 2013 3:09PM
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Look how the Internet have changed our life styles have changed dramatically, soon, it's just like in those SciFi movies...robots, sabotage, virtual sex...this is bad!
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