The behemoth that began as an ambitious online bookstore in the Pacific Northwest 19 years ago is planning a major expansion of its AmazonFresh grocery business in coming months and, if all goes well, the service could be in 20 cities in the U.S. and abroad by 2014, according to sources not authorized to speak publicly about the plans who nevertheless have spilled the beans to Reuters’ Alistair Barr.
The rollout will start in Los Angeles as early as this week and the San Francisco Bay Area later this year, Barr reports, writing that supermarket analyst Bill Bishop has heard that Amazon is targeting as many as 40 markets.
“Amazon has been testing this for years, and now it's time for them to harvest what they've learned by expanding outside Seattle,” says Bishop, who is the chief architect at consulting firm Brick Meets Click. “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 says.”
But veteran grocery executive Roger Davidson tells Barr that Amazon’s model of storing fresh produce and delivering it to the home has proven to be flawed in the past. “Will it work? I would bet against it,” Davidson opines. He favors the “click and connect” model used by Harris Teeter whereby “customers order food online and choose a time to pick up the produce from designated areas outside the company's stores” for a $4.95 fee, Barr reports.
Phooey on the “misguided naysayers” who misunderstand Amazon’s corporate strategy, Matthew Yglesias observes on Slate. “Amazon's strategy is to grow, grow, grow, grow, grow, and the fresh groceries market is a growth opportunity.” Whether they make a profit at it is irrelevant, he indicates. Which is a huge reason why “if I were a supermarket executive, I'd be trembling with terror right now,” writes Yglesias.
“Amazon has struggled to turn a profit from Fresh since 2007, when it began as a limited test on Mercer Island [Wash.], but there have been some hints of a recent breakthrough,” writes Amy Martinez in the Seattle Times. “Chief Executive Jeff Bezos, speaking at Amazon’s annual shareholders meeting last month, said Fresh had ‘made progress on the economics over the past year.’”
Those who should be twitching at the lips and shaking at the bones include “Kroger, Safeway, Whole Foods Market and even big retailers like Wal-Mart Stores and Target,” according to “The Tell” blog on MarketWatch. Wal-Mart began testing an online home delivery system, Walmart To Go, in San Jose, Calif., more than two years ago and is reportedly in five markets now.
Not everything is under wraps in Seattle. Amazon yesterday announced a multiyear, multinational deal with Viacom to carry popular children’s programming such as “Dora the Explorer,” “The Backyardigans” and“SpongeBob SquarePants” on Amazon’s Prime Instant Video. The news is trumpeted on its home page this morning.
“Amazon has created a unique, brand-friendly environment for streaming entertainment and consumer products, and we are excited to work with Amazon to bring customers shows they love,” says Viacom CEO Philippe Dauman.
Also included in the deal is programming from MTV, Nickelodeon and Comedy Central such as “Tosh.0,” “Workaholics” and “Awkward,” according to the Hollywood Reporter’s Lacey Rose, who reports that “the move comes just weeks after Viacom fare came off of rival Netflix, which opted not to renew its licensing deal with the cable giant.”
“Amazon has a smaller streaming audience than Netflix, but for Viacom the arrangement presents the opportunity to have tie-ins with the consumer products that Amazon sells, like DVDs, ‘Dora’ backpacks and ‘SpongeBob SquarePants’ beach towels,” Amy Chozick points out in the New York Times.
Amazon is also said to be working on a “Mystery Streaming Box,” as we re-reported in late April.
The humongous online retailer is clearly no longer making its decisions on the hop-to-it, “regret minimization framework” model that originally propelled founder Jeff Bezos to quit a cushy job on Wall Street before year-end bonuses were handed out in 1994 to take a shot on advancing the incipient commercialization of the Internet.
“You can count on us to combine a strong quantitative and analytical culture with a willingness to make bold decisions, Bezos wrote to shareholders in 2005. “As we do so, we’ll start with the customer and work backwards.”
As a customer, I can tell you that I’m eagerly awaiting delivery of a six-pack of Ghirardelli Chocolate Intense Dark Bar, Midnight Reverie 86% Cacao Bar ordered through Amazon on Friday. How sweet it will be, prices being equal, to get it on the same day it’s ordered.