Amazon plans to start delivering groceries in 40 U.S. markets, in hopes of destroying or disrupting the $568 billion food marketplace.
Amazon has been testing grocery delivery — AmazonFresh — in Seattle for a while, and was working on warehouse refrigeration capacity logistics to roll it out nationally.
Your local supermarket — you know, the one you’re forced to drive to — may be dead in the water, if Amazon gets its way
Bill Bishop, a prominent supermarket analyst and consultant, says everyone up the chain to Walmart is threatened by the plan:
Amazon’s expansion plans are a potential threat to grocery chains such as Kroger Co, Safeway Inc and Whole Foods Market, as well as general-merchandise retailers Wal-Mart Stores Inc and Target Corp, which also sell a lot of groceries.
“The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time,” he said. “That’s an awesomely scary prospect for the grocery business.”
Note that everyone is expecting Amazon to take a loss or maybe break even on groceries. The company is hoping margins will come from high-price items you add to your online shopping cart in addition to potatoes and orange juice.
It also wants to use a national network of warehouses and truck depots to support its high-margin, same-day delivery business.
In other words, killing Kroger might merely be a side effect of Amazon’s desire to deliver electronics more efficiently.