Amazon expanding on grocery stores

Amazon.com Inc. has been testing the concept of a online grocery store for years using its hometown Seattle as a starting point of a potentially growing business. One of the largest retail markets – groceries, has been a target of the online retailer for years. AmazonFresh is in a beta testing since 2007, and Amazon clearly have intentions to test the platform in Los Angeles and San Francisco according to people no authorized to give interviews, said Reuters. The expansion plans go as far as 2014. If everything goes according to plan the company would target 20 new urban areas.

Of course the already established grocery stores are seen as potential competitors of AmazonFresh. Chains such as Kroger Inc., Safeway Inc., Whole Foods Market as well as Walmart Stores Inc. and Target Corp. could really suffer from Amazons intentions to profit from simultaneously offering multiple product categories. Bishop, chief architect of a consulting firm Brick Meets Click focused on retail technology said “The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time,” he said. “Thats an awesomely scary prospect for the grocery business.”

Groceries has been a difficult sector for the online retailers to target, time has proven. Example of a massive company failure in the business is Webvan. The most significant flow in planning online grocery store service is believed to be the storage of products and their short expiration dates. Fresh products could easily spoil and turn into huge losses for the companies.

Despite being a fairly innovative service, Amazon is facing opposition as Walmart is also offering similar platform. Walmart is testing same day and next day delivery of online groceries and general products in San Francisco and Britain. FreshDirect is a company that delivers to offices and home addresses in some parts of New York. Some wholesalers offer a service called “Click and Connect” which allows the customer to make an order and pick it up from a location different than grocery store – a tool that could be used from traditional groceries to fight back against the AmazonFresh.

Surely if Amazon manages to combine its high margin product deliveries with the grocery service that would end up profitable for the company. The internet retailer has been on a 5 year climb of 220% surge in shares. Yesterday companys stocks closed at $265.70 per share.