Tomahawk, WI 7/25/2013 (Basicsmedia) – With Amazon now expanding its eCommerce business into delivering fresh groceries, will it have the same success as it had with electronics and appliances, leading the race against big names in the fresh delivery industry?

Amazon.com Inc. (NASDAQ:AMZN) is expanding its fresh grocery deliveries, which it has been running quietly in Seattle for nearly the last six years, recent reports reveal. It established AmazonFresh in 2007 on Mercer Island, Seattle as a limited marketing test. Seattle is the headquarters of Amazon, the online retailer giant. In Seattle, Amazon has been conducting door delivery of dairy, eggs, meat, boxed groceries, produce, and other items with one-hour and three-hour delivery windows in insulated containers to its customers. Experts estimate that the United State food marker is worth $1 trillion a year. It looks like Amazon wants to obtain a major share in this market.

Expansion Plans of Amazon in Fresh Groceries Delivery

Amazon started just as an online bookselling website but it evolved as the largest global online retailer in a very short period. Amazon included Los Angeles metropolitan area as a delivery area in its website unobtrusively on June 5, 2013 and Reuters reported that Amazon appears to plan a major expansion of its AmazonFresh business of fresh grocery delivery. According to market analysts, apart from Los Angeles, Amazon is likely to target San Francisco next before the end of this year and then proceed to another 20 urban areas in 204 within the U.S. and elsewhere in the world, especially the United Kingdom and Japan.

Problem Areas for Amazon in Expansion of Online Grocery Delivery Services

The major problem is the thin margins in grocery sales. Webvan Group Inc. entered this field in the beginning of last decade as an online grocery deliverer but it was a huge failure and the company wound up. Another failure was Kozmo.com Inc. Further, the market is already crowded with major heavyweight retailers operating in this field. Wal-Mart Stores Inc. (NYSE:WMT) is the largest retailer on earth and it is also testing online grocery and other general goods delivery services with same-day and next-day deliveries in San Francisco area. The Kroger Co. (NYSE:KR) is another powerful player in retail grocery industry and there have been reports that it is planning a roll out of more Ruler Food Shops.

The third most important grocery retailer is Safeway Inc. (NYSE:SWY). Safeway has its headquarters in Pleasanton, California and it is a retailer of food and drug merchandise in North America. Further, Safeway is also having its online grocery sales channels, such as Vons.com and Safeway.com. Hence, the planned expansion of Amazon in online grocery deliveries would meet with a stiff competition from these three major companies already established in the field.

Advantages for Amazon in Online Grocery Delivery Venture

Even though AmazonFresh is yet to achieve profits, its services have expanded to several suburbs in Seattle. Its customers are able to combine their food and grocery purchases with all other items that Amazon is offering. It is roughly estimated that the product offering of Amazon could be round 100,000 items. The margins on groceries might be very thin but the margins of the other products that Amazon offers are substantial. By combing the delivery of such products with grocery and food items, Amazon would be able to succeed in its venture, according to an analyst at Wells Fargo.

Online Grocery Sales Market

At present, the total sales of groceries online in the U.S. and U.K. are only 5% of the total grocery sales, according to one report. However, ComScore reported that nearly 12% of people using Internet have been buying groceries online. Forrester Research has estimated that the online sales of food items and beverages would be around $14.5 billion in 2013 in the United States. Considering these data and the advantages that Amazon possesses, it is quite possible that AmazonFresh would be a big success just like other ventures of Amazon, such as books, electronics, and appliances.

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