Amazon Fresh Poised to Disrupt NYC’s Grocery Market

Host: Amazon got its start selling books online, but now it’s a place where customers can buy just about everything. And in a handful of West Coast cities — and later this year, possibly New York — that includes groceries. Matt Collette reports on how the company aims to change the way we shop for food.

Grocery stores may have to be nimble to respond to web services like Amazon Fresh. Photo by Flickr user GraphiChris. Creative commons.
Grocery stores may have to be nimble to respond to web services like Amazon Fresh. Photo by Flickr user GraphiChris. Creative commons.

Collette: Scott Wingo has a busy household, with three kids and constantly-overlapping schedules.

WINGO: We never know if we’re coming or going. Sometimes I don’t see my wife for a few days because we’re on different schedules carting kids around. And invariably we’ll run out of the peanut butter and it’s because I forgot to tell my wife, then I have to live in the doghouse for two weeks. (0:12)

But the Wingos aren’t your regular grocery shoppers. Scott Wingo works as an analyst watching companies like Amazon, which sees grocery delivery as the next big thing in online shopping. It’s new service is called Amazon Fresh, and its next-day grocery delivery is already available in Southern California, San Francisco, and Seattle. Now, the company looks ready to launch Fresh here in the New York metro area. Wingo and other analysts say they’re seeing indicators that point to a rollout later this year. The company is building a new fulfillment center in a warehouse that’s already refrigerated, which to analysts like Wingo mean just one thing: groceries

WINGO: You know, if I was in the grocery business, I would be very worried about it. (0:03)

Amazon would be competing with brick and mortar grocery stores, where most New Yorkers do their shopping. It’d also be going against companies like Fresh Direct, another web-based delivery service. Bill Bishop is a consultant for food manufacturers looking to get their products online. He says the big challenge for online grocery sites is convincing customers the products they usually pick by hand — produce and meat in particular — will be top quality.

BISHOP: Online retailers — and I think Peapod would be an example, Fresh Direct would be an example — tend to overdeliver in terms of quality promise. (0:10) That focus on quality is expensive, but Amazon doesn’t necessarily need to make a profit here. The idea is that, if Amazon’s already coming to your house a couple times a week, you’ll order everything else from them too.

Again, Scot Wingo:

WINGO: The grocery delivery is a break-even, maybe lose-a-bit kind of model. But when you throw in products that are not grocery, then the whole thing becomes quite profitable. (0:10)

That means foods like apples, hamburger, and cereal are really a gateway to products like video game consoles, power tools, and sports equipment. Amazon’s got one other thing going for it, too. Most online transactions are usually just one or two items. That’s way different from how people shop for groceries, often a whole cartful at a time. And our shopping lists usually just say things like “peanut butter,” even though we know we want Superchunk. That kind of shopping is just annoying on the Internet.

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Enter, the Dash. It’s a little device you keep in your kitchen or pantry that lets you record voice memos or scan barcodes as you start to run out of something. Amazon debuted Dash in a video that’s kind of adorable.

DASH: With that simple design, it makes ordering groceries a piece of cake. (0:06)

Each item gets added to a master list online, where customers can add even more products before checking out.

DASH: And the barcode scanner is really fun to use. You never have to worry about being out of something you need. (0:09)

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At least for now, Fresh and its promises of an ever-stocked pantry is a luxury service that’s most likely to affect higher-end stores like Whole Foods. Bill Bishop says the convenience of not having to go to the store is a big factor in justifying the $300 annual cost.

BISHOP: This will not be something that’s for everyone, but for the individuals who have more money than time and have the ability to use their time effectively, I think this is going to be pretty popular. (0:18)

But for Wingo, it might solve that age-old peanut butter problem — and keep him out of the doghouse.

WINGO: I think this wand is going to save marriages across the country. (0:04)

Analysts say it will take a few more years and several more cities to see Amazon’s impact on the grocery industry. And while the jury’s still out on its impact on marriages, it certainly spells trouble for supermarkets.

Matt Collette, Columbia Radio News.

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