Photo via Andrew Hitchcock

Ordering groceries online and having them delivered to your door is one of those concepts that always sounds so promising. But companies have struggled for years to make the business model work.

And it looks like is no different, despite all its experience in e-commerce and distribution.

It has been nearly four years since the online retailer started rolling out the Amazon Fresh grocery delivery service in Seattle, but the company doesn’t appear to be in a rush to expand to other parts of the country. CEO Jeff Bezos said during the company’s shareholder meeting yesterday that Amazon is “still tinkering” with the economics of the Amazon Fresh business to try to come up with a workable formula.

It’s an issue close to the hearts of many people in the Seattle region, largely because of the former presence of HomeGrocer, one of the icons of the dot-com boom around here. HomeGrocer was acquired in 2000 by Webvan, which later went bankrupt. Amazon now owns Webvan, which ships groceries via the portal.

Here’s what Bezos said about Amazon Fresh …

“Amazon Fresh is a test. It’s only in Seattle. The customer experience is good. The economics, we’re still tinkering. The reason it’s a test is because we’re still tinkering with the business to try to make the economics acceptable. It’s an expensive service to provide. We’re basically working on it here in Seattle, seeing if we can get it to work. It’s a similar kind of operation to what HomeGrocer did 10 years ago, what Webvan did 10 years ago. We like the idea of it, but we have a high bar on what we expect in terms of the business economics for something like Amazon Fresh in terms of profitability and return on investment capital. We continue to think about that.”

Previously on GeekWire: Jeff Bezos on innovation: Amazon ‘willing to be misunderstood for long periods of time’

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  • HypFoods

    Amazon Fresh success seems pretty simple on the consumer side. AF can only compete on price & reliability. The market is households who know what their staples are, have predictability in volume usage and want/need to take advantage of the household volume discount for repeat deliveries. We need a certain level of quality (defined as lowest possible synthetic content & processes). AF got this right when they instituted the “subscribe & save” program for Fresh deliveries recently. Allowing me to purchase 3, 4, or 6 of something at once at regular intervals defined by me and receive a decent discount (like 15% & free delivery) is just the incentive that consumers need to stabilize their AF orders. 

    This economy has caused numerous changes in local shelf stock at brick & mortars, so that I never know what I’m gonna find at the actual store anymore and variety is no longer the feature that it once was. Knowing I can get what I need when I need it on my doorstep via Amazon Fresh is KICKIN’. Knowing that I don’t have to burn my fuel or add my emissions to the cityscape is a very HEARTY bonus. 

  • Anonymous

    Google recently annouced they plan to enter the home delivery business with a twist from the AF model.

    We deliver for any local merchant sameday, we do local merchants delivery to the home. Save gas, less emissions and free coupons to offset the small delivery fee.

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