Amazon.com CEO Jeff Bezos was optimistic about the progress of Amazon Fresh at the company shareholder meeting last month, and now reports indicate that the company’s grocery service may finally be expanding outside of the Seattle region.
Sources tell Reuters that Amazon is set to launch Amazon Fresh in Los Angeles this week, San Francisco later this year and in potentially 20 other cities in 2014, some of which may be outside the United States.
During the company’s earnings conference call in late April, analyst Matt Nemer of Wells Fargo Securities said he had heard reports that Amazon was adding refrigeration equipment to some of its distribution centers outside of the Seattle area, but the company sidestepped the question.
Amazon Fresh, debuting in 2007, has been one of the longest trial runs in technology history, rivaling the Gmail beta in duration. The duration of the Amazon Fresh program in Seattle is a testament to Amazon’s willingness to take the long view.
Online grocery delivery is no doubt a very tough business. But after watching failed delivery companies like Webvan and HomeGrocer, Amazon has taken its sweet time and “tinkered” with the economics to come up with a workable formula.
“The reason it’s a test is because we’re still tinkering with the business to try to make the economics acceptable,” Bezos said exactly two years ago. “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.”
From the delivery bags to the pricing structure, the Amazon Fresh experience in 2013 is quite different from when it launched in 2007. GeekWire’s Todd Bishop recently reviewed the service and has this to say:
So what can people expect if this service rolls out to additional cities? A great online experience, fantastic convenience, solid customer service, decent produce, questionable meat, and much higher prices, on average, than found at the neighborhood store.
Here’s a sample of product prices on Amazon Fresh, compared to prices at a nearby Fred Meyer. Whenever possible, the comparison is to the same brand.
With Amazon building out its network of distribution centers around the country, it’s not surprising to see the company expand Amazon Fresh. Given all of Amazon’s experience, and its tolerance for thin profit margins, it’s going to be interesting to see if any other big comptitetors — namely Google — take on Amazon in the local delivery business arena.
Previously on GeekWire: Study: Online grocery delivery is more environmentally-friendly than driving to the store