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US Food and Drink Report Q3 2007
Business Monitor International, Nov 2007, Pages: 36
The US Food Drink Report provides independent forecasts and competitive intelligence on USs food and drink industry.
When e-commerce retailer Amazon first launched a fresh online grocery delivery programme in 1999 following an investment of US$42.5mn, US mass grocery retailers did not pay much attention. The programme lacked success and, in 2001, was sold to Webvan. Things might be different this time - in August 2007, Amazon announced a new fresh online grocery delivery programme, AmazonFresh, to be piloted in the Seattle suburb of Mercer Island together with a pick-up service in the Bellevue and Kirkland suburbs. The programme is essentially an extension of a gourmet food business Amazon launched in 2003, and a dry grocery service launched in 2006.
Under the company’s plans, AmazonFresh will most likely offer products found in a typical mass grocery retail outlet, including dairy products, meat, fish, fruits and vegetables, snacks, ice cream, cereals and personal care products. Following registration, customers will be able to place their order and receive delivery by an Amazon-owned delivery fleet the next day during the chosen one-hour slot. Alternatively, customers can collect their order from a local pick-up point or receive pre-dawn delivery, with products left in temperature-controlled totes on doorsteps. Amazon has moved slowly in developing its new business concept, building on the success of their gourmet food business and dry grocery service, and AmazonFresh will only be extended to further areas of the country once it has proven successful in the pilot area. The stakes are high especially because, with fresh products, Amazon can no longer rely on its existing distribution network which has successfully
been used to distribute dry goods.
Thus the e-retailer had to invest in refrigerated trucks, and has entered a business segment where frequent deliveries are of great significance. In addition, food margins are low and competition from traditional MGRs can be expected to be strong. According to the Food Marketing Institute, only 6% of US shoppers purchased groceries online during 2006, a figure much lower than that in many European markets, where population density is higher and shopping habits are less diverse. Eighty percent of US shoppers have, however, purchased non-food products online, illustrating the large sales potential for a carefully planned concept.
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