In this day and age, almost everyone has bought at least one item online, whether it be office supplies, clothing, gadgets and technology-related items, beauty products, or even pets, for God’s sake.
What’s the one item that isn’t listed above that is starting to take the online retailing and e-commerce market by storm?
Groceries.
Whether you call it the supermarket, grocery store or market, and whether you shop at Safeway, Albertsons, Vons, Lucky, Publix or the Piggly-Wiggly (yes, I went there), nothing beats the idea of not having to make a list, drive to the store, gather your items, wait in long lines, drive home and unpack everything like clicking a few buttons and having your groceries delivered to your front door.
A majority of large supermarket chains offer this option, but not with the option of ordering food and your favorite DVD or pair of shoes. Amazon.com recently announced the planning of a major roll-out of an online grocery business that it has been quietly developing during the past few years, according to Reuters.
While food is a low-margin business, Amazon could outperform similar online grocery services by delivering orders for higher-margin items such as electronics at the same time. With the success of the test of AmazonFresh in its hometown of Seattle for the past five years, Amazon is now planning to expand its grocery business starting with Los Angeles as early as next week and the San Francisco Bay Area later this year. If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States.
In a Business Insider article posted on SFGate, Bill Bishop, a prominent supermarket analyst and consultant, says everyone in the grocery business up to Walmart is threatened by the plan: Amazon’s expansion plans are a potential threat to grocery chains such as Kroger Co., Safeway Inc. and Whole Foods Market, as well as general-merchandise retailers Walmart and Target Corp., which also sell a lot of groceries.
“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,” says Bishop. “That’s an awesomely scary prospect for the grocery business.”
This giant possible shift in online retailing may not only change the online grocery shopping business, but the retail business in general. We’ll have to wait and see what the future holds.
Denise DeChaine is special projects editor of Institutional Real Estate, Inc.
