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Tuesday, January 25, 2011

A Really Interesting Development

Given how smart the people running Amazon have proven themselves, this is a development that could make major changes in how we live in the U.S. What do you think?

Amazon steps up groceries push

By Jonathan Birchall in New York

Published: January 23 2011 17:59 | Last updated: January 23 2011 17:59

Amazon, the online retailer, is developing a free weekly home delivery service in the US that could support its drive to increase online sales of low-priced goods, such as health and beauty, babycare and groceries.

The retailer has been testing the service, AmazonTote, in Seattle, its home city, since last summer, and is now recruiting staff for what it describes as a “company wide” programme.

The Seattle service offers customers free weekly home delivery regardless of order value on a specified day. The goods are delivered in reusable, weatherproof tote bags to the customer’s address.

By offering free delivery with no minimum purchase price, the service is designed to encourage customers to use Amazon as their main retail destination for regular household purchases.

Amazon is using the small truck fleet that operates its pilot AmazonFresh grocery delivery service. It declined to give details of any expansion plans, but its website says the service “will be expanding soon”.

Rich Tarrant, chief executive of MyWebGrocer, which provides online services to more than 100 regional supermarket businesses, argues that Amazon’s delivery service could strengthen its potential long-term challenge to Walmart, the largest retailer in the US.

“Because of the frequency of grocery purchases . . . you have an opportunity to be in front of the customer at least once a week.

“By tying in that frequency with the ability to get everything else you want, you literally have created the virtual Walmart,” he says.

Walmart rose to supremacy in the US in the 1990s with its successful Supercenter stores, using low-price groceries to increase customer visits and thus support sales of higher margin general merchandise.

Walmart is also developing an online strategy for groceries and low-cost household goods.

It is focusing on using its extensive network of stores to provide collection locations for online orders, arguing that the stores give it a strategic advantage over “pure” internet rivals such as Amazon.

Walmart is expanding a same day, in-store collection service for some online items. It has also started to sell low-cost household goods such as detergent, toothpaste and some packaged foods online, and has said it will test more online grocery sales this year.

Amazon launched nationwide grocery online sales last year in the UK and Germany, using its regular package shipping service.

Copyright The Financial Times Limited 2011. You may share using our article tools.

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