Will Groceries Solidify Amazon’s Retail Domination?

Posted by · June 5, 2013 2:49 pm

empty grocery storeWatch out, Kroger! Amazon is coming for you. The company that put the first nail in the coffin of many brick and mortar stores (RIP Books-a-Million, Borders and Circuit City), announced this week that it is now gunning for grocery stores in the US and eventually around the world.

AmazonFresh, Amazon.com’s online grocery business, has been running quietly–and successfully–in Seattle for the past five years and will reportedly expand to Los Angeles later this week, San Francisco later this year and if all goes well, to 20 other urban locations around the world by 2014. The service delivers fresh produce and meat directly to customers doorsteps with a fleet of Amazon’s own trucks.

Naysayers are already calling AmazonFresh a bad idea, saying that produce will likely be out of date or get damaged before it reaches the customer. Yet, behind closed doors, there are probably a few beads of sweat forming on grocery executives heads as well as the folks in charge at UPS and FedEx. After all, if Amazon starts using their own trucks to ship groceries, it stands to reason that they will also use those trucks to ship other Amazon products.

Detractors (who are likely just jealous and fearful competitors) aside, this move makes sense for Amazon. Despite a down economy, the company’s shares have grown 220 percent over the past five years. Jeff Bezos is, no doubt, looking for a new market for his company to enter and non-perishable grocery items are already a large part of Amazon’s inventory.

Furthermore, even if it takes a while for AmazonFresh to catch on, and Amazon takes a loss on the new venture at first, Bezos has always been a long-term thinker. In last year’s letter to shareholders, he said: “…long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.”

In the long-term, a successful foray into the grocery business means that people may have no reason (besides a desire to breath fresh air and support local/other businesses) to shop in brick and mortar stores. If purchasing groceries from AmazonFresh is as “surprising and delightful” as buying other products from the company, the grocery business might find itself “sad and despondent” in the very near future.

  • Book Nerd

    The reports of Books-A-Million’s demise have been greatly exaggerated. It’s still alive and kicking (and clawing) for survival!

  • Guy Portman

    An interesting development. I wonder how long it will be until AmazonFresh is here in the UK. I just wrote a post about Amazon’s global domination – http://guyportman.com/2013/07/05/amazons-domination/