A Personal Blog
The Secret Reason for Amazon Getting Into Groceries
TechCrunch is all confused by it. Others have basically jumped on it saying it’s about time someone did local delivery of food (which I agree with, in Toronto we had Grocery Gateway and I was a huge user).
However, I believe the reason Amazon is doing this has nothing to do with food. Food simply pays for the expansion of the service to a nation-wide one in the next 4-5 years.
Amazon doesn’t care about food.
What Amazon does care about is distribution. And, for the first time, Amazon is going the last mile, right to your doorstep. Now, ask yourself, if they can get groceries to your door for cheap, what is the incremental cost of adding a few books to the delivery?
Yep. Amazon is building a distribution network, with food paying for it. In the next few years, they’ll have most major US cities covered. It’ll be just-about-profitable, but the savings on shipping books and other Traditional Amazon items will more than offset that near-loss.
At that point, they only need to ship items to cities. Buy a few hundred tractor-trailers, or buy some airplanes, or buy some trains, and they are set. They can dispense entirely with FedEx/UPS/USPO, etc. They can own everything from the warehouse to the end-point.
Genius (unless I’m wrong, heh).
About the author
| Print article | This entry was posted by Jeremy Wright on August 2, 2007 at 12:09 pm, and is filed under Business. Follow any responses to this post through RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed. |
about 4 years ago
Oooh.
Dredges up all the horrible memories of the Webvan demise.
Anyway, I’m not sure you’re right. Amazon is very smart. They are an e-tailer, not a distributor. Their focus is product, not distribution.
But I may be wrong too :)
-Alister
about 4 years ago
Absolutely. amazon has never cared about what they sell, just the way they sell it. their value is all about being the king of the supply chain. Whilst i don’t see them acquiring a fleet of jets, they’re certainly well positioned to acquire local couriers and so on…
about 4 years ago
Interesting stuff.
I’m a huge Amazon fan, an Amazon Prime subscriber and a shareholder. I’ve bought a bunch of food from them. I’ve turned my parents onto it, as well – a few weeks back or so, my Mom asked me to look up the Annie’s Macaroni and Cheese that my little brother eats. I looked it up and the price difference was about $2 a box (which is a big deal on a $3.50-$6 product).
It’ll be interesting to see how Amazon Fresh develops.
about 4 years ago
several years ago we had WebVan, which I became addicted to and still suffer from withdraws. However, one thing to note was that WebVan did partner with Amazon.com before they crashed and burned. I bought my first Harry Potter book while buying groceries. It only makes sense. Go into any decent sized grocery store and they have books, gifts, auto supplies and eggs.
Many people have turned to superstores like Sams and BJs… why shouldn’t Amazon take that model and provide it online. I just hope they succeed so I do not have to go through withdraws again.
about 4 years ago
It is only natural to expand once you have controlled a market for a while. Amzon is simply spreading its wings to other markets. I like the reference to the supermarket where you can, as a matter of fact, purchase books as well.
about 3 years ago
The ball valve definition, words related to ball valve,the word ball valve from dictionary.The vitiligo pamphlet vitiligo is a skin,an introduction to vitiligo by the vitiligo society.