| SAN FRANCISCO, June 4
SAN FRANCISCO, June 4 Amazon.com Inc is
planning a major roll-out of an online grocery business that it
has been quietly developing for years, targeting one of the
largest retail sectors yet to be upended by e-commerce,
according to two people familiar with the situation.
The company has been testing AmazonFresh in its hometown of
Seattle for at least five years, delivering fresh produce such
as eggs, strawberries and meat with its own fleet of trucks.
Amazon is now planning to expand its grocery business
outside Seattle for the first time, starting with Los Angeles as
early as this week and the San Francisco Bay Area later this
year, according to the two people who were not authorized to
If those new locations go well, the company may launch
AmazonFresh in 20 other urban areas in 2014, including some
outside the United States, said one of the people.
Bill Bishop, a prominent supermarket analyst and consultant,
said the company was targeting as many as 40 markets, without
divulging how he knew of Amazon's plans.
An Amazon spokeswoman did not respond to a request for
comment on Tuesday.
Amazon is searching for new, large markets to enter as the
company tries to maintain a growth rate that has fueled a 220
percent surge in its shares over the past five years. The
grocery business in the United States, which generated $568
billion in retail sales last year, may be a ripe target.
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.
"Amazon has been testing this for years and now it's time
for them to harvest what they've learned by expanding outside
Seattle," said Bishop, chief architect at Brick Meets Click, a
consulting firm focused on retail technology.
"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
A successful foray into groceries could also help underwrite
the development of a broad-based delivery service employing
Amazon trucks to deliver directly to homes, which could have
implications for UPS, FedEx and other package
delivery companies that currently ship Amazon goods.
Still, groceries have proven to be one of the most difficult
sectors for online retailers to crack. One of the most richly
funded start-ups of the dot-com era, Webvan, was a spectacular
failure as the cost of developing the warehouse and delivery
infrastructure proved overwhelming.
Roger Davidson, a former grocery executive at Wal-Mart,
Whole Foods and Supervalu, said Amazon will struggle to
make money from AmazonFresh because fresh produce can easily go
bad in storage warehouses and get damaged during delivery -
something known as "shrink" in the business.
"Will it work? I would bet against it," Davidson said. "The
reasons these businesses have failed in the past have not gone