Amazon.com Inc is planning a major roll-out of its online grocery business AmazonFresh across global markets, including North America, in a move that it has been quietly developing for years.
While food is a low-margin business, Amazon could outperform similar online grocery services by delivering orders for higher-margin items like electronics at the same time, suggest observers.
Amazon's announcement follows internet giant Google's announcement of its plans to enter the online grocery business through a new service, called Google Shopping Express, that would start off providing same-day delivery of food and other products bought online. (See: Google to move into grocery delivery with Shopping Express).
AmazonFresh's expansion plans include new warehouses with have refrigerated areas for food, but also space nearby to store up to one million general merchandise products in some cases – though not necessarily in India.
The company has been testing AmazonFresh in its hometown of Seattle for at least five years, delivering fresh produce such as eggs, strawberries and meat with its own fleet of trucks.
Amazon is now planning to expand its grocery business outside Seattle for the first time, starting with Los Angeles as early as this week and the San Francisco Bay Area later this year, according to the two people who were not authorized to speak publicly.
If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States.
Amazon is searching for new, large markets to enter as the company tries to maintain a growth rate that has fuelled a 220 per cent surge in its shares over the past five years. The grocery business in the United States, which generated $568 billion in retail sales last year, may be a ripe target.
Amazon's expansion plans in North America are a potential threat to grocery chains such as Kroger Co, Safeway Inc and Whole Foods Market, as well as general-merchandise retailers Wal-Mart Stores Inc and Target Corp, which also sell a lot of groceries.
In what may be a pointer to its ambitions in marking a presence in India's organised retail sector, Amazon today announced the launch of its first shopping website in India.
The company took its first steps into the Indian market in February 2012 when it launched Junglee.com, a site which allowed customers to compare prices online but not purchase items directly. (See: Amazon launches entry into India's buy-sell e market)
India has over 50 million active internet users, about 40 per cent of whom have previously made purchases online.
In India, Amazon will have to compete against local 'kirana' groceries and door-to-door greengrocers. Moreover it will not find it easy to set up large refrigerated stores, owing to infrastructure and regulatory constraints.
It is not clear whether AmazonFresh currently makes a profit, because the company does not disclose results from the business. Amazon's chief executive Jeff Bezos said that they had "made progress on the economics over the last year" at a shareholders' meeting in May 2013.