The Information has a piece about how “Amazon is planning a new ultrafast delivery offering for groceries and other daily essentials in major urban areas in the U.S., a critical test of the e-commerce giant’s ambitions to sell more daily staples to consumers and supercharge its grocery business.
“In recent months, Amazon has approached large consumer packaged goods brands to ask them for lists of products it could sell through the service, according to a person with knowledge of the talks. Amazon is also seeking municipal approvals to build or renovate small delivery hubs in cities including Seattle, Philadelphia and Fort Worth, Texas, according to permit filings. The company would aim to make deliveries to shoppers in 30 minutes or less, according to one of the filings.”
Part of the development process has been focused on hiring both warehouse employees and drivers who can staff the new business segment: It would “run the service through small, specialized convenience store–style fulfillment centers, where Amazon Flex gig workers will pick up orders of items like snacks, prepared food and household products after warehouse staffers pack them, according to plans for the fulfillment centers. These centers would generally be smaller than 10,000 square feet and centrally located in urban areas.”
The Information suggests that “the offering would be a bold bet for Amazon. Ultrafast delivery – typically defined as delivering goods as soon as 15 minutes after a customer places an order – has proved to be a challenging market for an array of startups. In the early days of the pandemic, firms like Gorillas, Getir and Fridge No More promised grocery delivery in as little as 15 minutes in major cities in the U.S. and Europe, but most of the firms struggled to operate profitably and ended up going out of business.
“Gopuff, one of the only ultrafast-focused firms left operating in the U.S., recently raised $250 million in new funding at a reported valuation of $8.5 billion, a sharp decrease from its $15 billion valuation in 2021.”
The story points out that Amazon has been testing ultrafast delivery of fresh and packaged grocery items outside the US, including in a UK alliance with GoPuff.
“Plans for an ultrafast delivery service come as Amazon faces increasing competition in the online grocery business from longtime rival Walmart, as well as upstart delivery firms like DoorDash and Uber Eats, both of which have leaned into grocery delivery as a key area of growth,” The Information reports. “Amazon is also under pressure to continue to grow its overall retail sales while also boosting profits and cutting costs that ballooned during the pandemic … Launching a quick delivery service in the U.S. would boost Amazon’s efforts to grow its business selling what it calls ‘everyday essentials’ – items like energy drinks, paper towels and peanut butter – which has emerged as a critically important category for the company over the past few years under Amazon’s retail chief, Doug Herrington. These items can be low margin and sometimes even unprofitable for Amazon to sell, but executives say they encourage repeat purchases and bring new shoppers to its site, which is beneficial for its business over the long term.”
Of course, this isn’t Amazon’s first trip the fast-delivery rodeo in the US: “Amazon has previously offered quicker delivery services in the U.S., including Prime Now, a stand-alone two-hour delivery feature that the company ultimately folded into the main Amazon site in mid-2021. It currently offers two-hour grocery delivery from a range of regional grocery chains in the U.S., including Winn-Dixie and Bristol Farms, as well as a same-day delivery service for Prime members for items ranging from pantry staples to electronics.”
And, just because Amazon is testing something doesn’t mean it is going tom work: “Amazon often experiments with new retail and delivery concepts. The fulfillment center that’s under construction in Seattle, for example, was previously a location for Amazon Fresh Pickup, a drive-up grocery pickup concept the company tested in Seattle. Amazon shut down its two Fresh Pickup locations in the city, one in 2023 and the second in 2024.”
As The Information reports on this new retail venture for Amazon, it is worth acknowledging that while Amazon has not been as successful as it hoped in bricks-and-mortar food retailing, it still is a behemoth in the sector with considerable force and resources. Scott Moses, Head of the Grocery, Pharmacy & Restaurants Investment Banking practice at Solomon Partners, spotlights the degree of Amazon’s food retail footprint in one of his “5 More Things You Might Not Know” infographics – specifically that Amazon is a the number four grocer in the world, with a $2.6 trillion market value, generating revenue from ventures that include Prime subscriptions and advertising. All of which gives it the resources to continue investing in the grocery sector.
By the way, CNBC has a piece about exactly how dominant Amazon can be when it finds a category and an approach that fits it: “Amazon’s grip on the apparel industry just keeps getting tighter.
“Amazon’s market share for the apparel and footwear segment reached nearly 13% in 2024, with sales over $67 billion, more than double Walmart’s about $32 billion business, according to a Wells Fargo industry note published in September. The firm expects Amazon’s sales in the category to surpass $72 billion in 2025.
“When looking at purely online sales, it’s more than 10 times Walmart’s size.
“The e-commerce giant first overtook Walmart as the top clothing retailer in the U.S. in 2018 as its apparel and footwear sales crossed $35 billion, according to research from Wells Fargo and Euromonitor.”
KC’s View:
I’m looking forward to doing an Innovation Conversation with Tom Furphy on this subject, but I would point out that a lot of this innovation is built around e-grocery, not bricks-and-mortar development.
It always has been my argument that Amazon has the ability to be far more dominant in e-grocery than in the physical grocery business. It never will have the kind of footprint it needs to be successful in bricks-and-mortar, and pretty much every major chain is way ahead of it in terms of actual locations. Short of trying to buy one of those chains – which doesn’t make any kind of sense to me – it strikes me as a lot smarter to use its extraordinary advantages in e-commerce and logistics to raise the bar in that segment, where it has unambiguous advantages.
Will Amazon do what I’ve been suggesting, which is to close down all its physical grocery stores – except Whole Foods – and just focus on e-grocery domination? I have no idea, but I do think these new developments suggest that if they can’t figure out the physical grocery store business pretty soon, they’ll chalk it up as just one more idea that didn’t work and get back to the stuff in which nobody does it better.
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