Amazon Expanding ‘AmazonFresh’ Online Grocery Business [Report]

Amazon may expand AmazonFresh beyond Seattle is reportedly planning to expand AmazonFresh beyond Seattle, the backyard of the company’s headquarters.

The online grocery service makes home deliveries in Seattle area, a experiment that has lasted five years, but apparently it will launch in Los Angeles and San Francisco in the coming weeks according to unnamed sources. These are two areas where the company has built new distribution warehouses with refrigeration capabilities. If the venture does well in California, “the company may launch AmazonFresh in 20 other urban areas in 2014.” One industry observer suggests that the company could be targeting up to 40 markets for this expansion. Amazon has not made an official comment or confirmation about any AmazonFresh expansion plans as yet.

In addition to competing with supermarket chains, a byproduct of AmazonFresh could also be a fleet of trucks that would enable Amazon to get into the package delivery business for its own stuff, particularly consumer electronics.

The expansion plans may focus on the major metro areas like New York, Chicago, and D.C., where Amazon already offers same-day delivery. Amazon may be eying the grocery business because it accounts for an estimated $500 billion plus in retail sales per year.

The grocery business has been a challenge for for the online sector to date. “Grocery has proven relatively impervious to attempts to turn it into an online business thus far, mostly because of immense costs of keeping inventory on hand, factors like spoilage that don’t affect other goods, and delivery complications (refrigerated trucks, for instance).” Other firms have tried online delivery with mixed results, notably Webvan.

CEO Jeff Bezos was somewhat noncommittal about AmazonFresh’s profitability at last month’s shareholders meeting, noting that the AmazonFresh team had made progress and that “They’ve been doing a lot of experiments and trying to get the right mixture of customer experience and economics.”

Would you buy your groceries online rather than go to a bricks-and-mortar supermarket?