Amazon makes play for online grocery market – but will it deliver?

AmazonFresh’s bright green trucks have become familiar sights in Seattle, San Francisco and Los Angeles, they have just appeared in San Diego, and may eventually trundle around the world, transforming grocery shopping.

At first sight the expansion of Amazon’s grocery service, AmazonFresh, through California signals an audacious gamble to seize a share of the US’s $1tn (£600bn) food market and turn the online retailer into an even bigger behemoth.

Amazon revenues are set to breach the $100bn barrier for the first time this year but that hardly satisfies the Seattle-based company’s founder, Jeff Bezos.

He reportedly hopes the move into groceries will help him catch up with Walmart, which has sales of $475bn. For Bezos, food is another sector to be conquered in a quest for retail domination.

Says Bezos: “We’ll continue our methodical approach – measuring and refining AmazonFresh – with the goal of bringing this incredible service to more cities over time,” he told shareholders earlier this year.

The green fleet’s arrival in San Diego last month followed a phased roll-out in LA and San Francisco over the past year after a five-year trial in Seattle. For a $299 annual fee customers can order from a range of 500,000 products – including milk, bread, lettuce, steak, toys, electronics – and expect delivery the same day or early the next morning.

Bezos, a Star Trek fan who initially wanted to call his company, after Captain Jean-Luc Picard’s catchphrase, apparently considers groceries, especially perishables, one of online commerce’s final frontiers. In which case expanding from rainy Seattle down to the sunbaked Mexico border is just the beginning.

But there is a problem: groceries may be a financial black hole. Some analysts warn that Amazon could haemorrhage cash and credibility by entering a complex, costly sector with razor-thin margins….

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