RedWine
08-06-2007, 08:30 AM
Having changed the way consumers buy books, CDs and even electronics, Amazon.com has set its sights on its most ambitious project yet: groceries.
The online retailer is piloting AmazonFresh, which delivers fruit and veg and other perishables straight to your kitchen, taking it into a business that proved a graveyard for a host of lesser start-ups during the dot.com boom at the turn of the decade.
So far, AmazonFresh is being tested only in Mercer Island, a 22,000-strong enclave in Lake Washington, next to Seattle, but the company hopes to roll out to other cities. It has teamed up with local wholesalers and farmers to get its hands on enough produce to offer choice to consumers.
Amazon says it is responding to years of requests from customers that it start offering groceries, but the project is fraught with commercial danger.
Grocers work on hair-thin margins, and the perishable nature of the produce means it must buy just the right amount to satisfy demand, or face losing large sums through waste.
"When we feel we are ready to add more customers to the invite list and we can provide those customers with a great experience then we will do so," an Amazon spokesman said.
But he added there was no guarantee the project would go national, let alone international.
At the height of the dot.com frenzy, companies such as WebVan and Streamline opened their virtual doors only to shut down or be acquired by larger firms.
Webvan, for instance, boasted 750,000 customers in cities including San Francisco, but it burned through US$830 million ($1.08 billion) in two years before filing for bankruptcy protection in 2001.
Amazon.com ,may be biting off more than Seattle residents can chew with the company's new grocery-delivery service. The quiet rollout of AmazonFresh, available by invitation only in some Seattle neighborhoods, may conjure up the ghosts of the dot-com bubble that companies such as Webvan and Peapod helped burst.
http://www.king5.com/business/stories/M_IMAGE.11350fb5491.93.88.fa.d0.db5bcc93.jpg
Webvan is toast, but the remnants of Peapod are powering home-delivered groceries in several markets.
There a big difference between AmazonFresh and Webvan, though. Dreams were big in Webvan's profitless world, while Amazon is in the black and aiming smaller. Limiting itself to a fleet of trucks where it's a hometown hero, Amazon can gradually work itself into a new market on its own terms.
There is no pressing need to get it right quickly. This is a slow, fragmented market. Webvan's implosion sent a flare into the venture-capital sky. These days, most online grocery-delivery services are modest premium offerings by local supermarkets with meager appetites.
Cool trucks, Amazon
I couldn't live further from Seattle. That means that I won't be able to order up the humble pie that I deserve. I certainly didn't see this coming last summer, when Amazon began stocking more than 10,000 non-perishable items, selling them just like any other items in its perpetually expanding showroom.
"This also won't be a rerun of the ill-fated Webvan idea," I wrote at the time. "Amazon isn't going with a costly, localized distribution emphasis armed with refrigerated delivery trucks."
Well, Amazon's refrigerated delivery trucks are now rolling around, dropping off temperature-controlled totes to orders specifying pre-dawn delivery. The company is also providing one-hour windows for daytime deliveries.
Minimum orders apply for free shipping. After all, Amazon wasn't born yesterday. Naturally, there are also quality-control challenges in delivering fresh produce and meat cuts. Ice cream melts. Fruits have flaws. Customers will pay up for the convenience of forgoing the time-sucking process of zig-zagging through supermarket aisles with squeaky-wheeled shopping carts, but with that premium comes higher expectations.
I still like Amazon's chances here. I also like the name, though I wonder whether the Chinese makers of Amazonfresh toothpaste may have a bone to pick with the Seattle company's name choice.
Still, there are bigger implications here than simply seeing whether Amazon is able to deliver a crate of eggs to the finicky residents of the upscale Mercer Island neighborhood. If Amazon is able to swing this local-delivery thing, what's to stop it from not simply being a new and improved Webvan, but a new and improved Kozmo as well?
Kozmo-politan
Like Webvan, Kozmo was another poster child of dot-com bubble excess. Its plan to arm metropolitan cities with bike messengers to deliver just about anything seems laughable in retrospect, but how far is AmazonFresh's fleet from duplicating the feat?
It would work only in the markets where Amazon has a warehouse presence, but what's to stop Amazon from cutting out the shipping middleman if it can deliver Harry Potter books or Hanna Montana CDs on its own?
Yes, this is the kind of talk that spooks investors. E-tail isn't out of the woods yet. Companies such as Drugstore.com (Nasdaq: DSCM), Red Envelope (Nasdaq: REDE), and Overstock (Nasdaq: OSTK) are still losing money. Amazon has been able to successfully roll out 41 different store categories because they all revolve around the same model. Running local deliveries is rooted in an entirely different infrastructure.
But what if the AmazonFresh experiment proves successful? There are several other metropolitan markets starving for an established online grocery-delivery service. My wife still laments the day that PublixDirect called it quits four years ago in Miami. At the time, Publix argued that there just weren't enough customers to make the service financially worthwhile.
However, a lot has happened since many of the online grocery services went kaput. Broadband coverage is wider. The masses trust online merchants. No one knows this better than Amazon. If someone is going to build the better Webvan, it may as well be market darling Amazon.
The online retailer is piloting AmazonFresh, which delivers fruit and veg and other perishables straight to your kitchen, taking it into a business that proved a graveyard for a host of lesser start-ups during the dot.com boom at the turn of the decade.
So far, AmazonFresh is being tested only in Mercer Island, a 22,000-strong enclave in Lake Washington, next to Seattle, but the company hopes to roll out to other cities. It has teamed up with local wholesalers and farmers to get its hands on enough produce to offer choice to consumers.
Amazon says it is responding to years of requests from customers that it start offering groceries, but the project is fraught with commercial danger.
Grocers work on hair-thin margins, and the perishable nature of the produce means it must buy just the right amount to satisfy demand, or face losing large sums through waste.
"When we feel we are ready to add more customers to the invite list and we can provide those customers with a great experience then we will do so," an Amazon spokesman said.
But he added there was no guarantee the project would go national, let alone international.
At the height of the dot.com frenzy, companies such as WebVan and Streamline opened their virtual doors only to shut down or be acquired by larger firms.
Webvan, for instance, boasted 750,000 customers in cities including San Francisco, but it burned through US$830 million ($1.08 billion) in two years before filing for bankruptcy protection in 2001.
Amazon.com ,may be biting off more than Seattle residents can chew with the company's new grocery-delivery service. The quiet rollout of AmazonFresh, available by invitation only in some Seattle neighborhoods, may conjure up the ghosts of the dot-com bubble that companies such as Webvan and Peapod helped burst.
http://www.king5.com/business/stories/M_IMAGE.11350fb5491.93.88.fa.d0.db5bcc93.jpg
Webvan is toast, but the remnants of Peapod are powering home-delivered groceries in several markets.
There a big difference between AmazonFresh and Webvan, though. Dreams were big in Webvan's profitless world, while Amazon is in the black and aiming smaller. Limiting itself to a fleet of trucks where it's a hometown hero, Amazon can gradually work itself into a new market on its own terms.
There is no pressing need to get it right quickly. This is a slow, fragmented market. Webvan's implosion sent a flare into the venture-capital sky. These days, most online grocery-delivery services are modest premium offerings by local supermarkets with meager appetites.
Cool trucks, Amazon
I couldn't live further from Seattle. That means that I won't be able to order up the humble pie that I deserve. I certainly didn't see this coming last summer, when Amazon began stocking more than 10,000 non-perishable items, selling them just like any other items in its perpetually expanding showroom.
"This also won't be a rerun of the ill-fated Webvan idea," I wrote at the time. "Amazon isn't going with a costly, localized distribution emphasis armed with refrigerated delivery trucks."
Well, Amazon's refrigerated delivery trucks are now rolling around, dropping off temperature-controlled totes to orders specifying pre-dawn delivery. The company is also providing one-hour windows for daytime deliveries.
Minimum orders apply for free shipping. After all, Amazon wasn't born yesterday. Naturally, there are also quality-control challenges in delivering fresh produce and meat cuts. Ice cream melts. Fruits have flaws. Customers will pay up for the convenience of forgoing the time-sucking process of zig-zagging through supermarket aisles with squeaky-wheeled shopping carts, but with that premium comes higher expectations.
I still like Amazon's chances here. I also like the name, though I wonder whether the Chinese makers of Amazonfresh toothpaste may have a bone to pick with the Seattle company's name choice.
Still, there are bigger implications here than simply seeing whether Amazon is able to deliver a crate of eggs to the finicky residents of the upscale Mercer Island neighborhood. If Amazon is able to swing this local-delivery thing, what's to stop it from not simply being a new and improved Webvan, but a new and improved Kozmo as well?
Kozmo-politan
Like Webvan, Kozmo was another poster child of dot-com bubble excess. Its plan to arm metropolitan cities with bike messengers to deliver just about anything seems laughable in retrospect, but how far is AmazonFresh's fleet from duplicating the feat?
It would work only in the markets where Amazon has a warehouse presence, but what's to stop Amazon from cutting out the shipping middleman if it can deliver Harry Potter books or Hanna Montana CDs on its own?
Yes, this is the kind of talk that spooks investors. E-tail isn't out of the woods yet. Companies such as Drugstore.com (Nasdaq: DSCM), Red Envelope (Nasdaq: REDE), and Overstock (Nasdaq: OSTK) are still losing money. Amazon has been able to successfully roll out 41 different store categories because they all revolve around the same model. Running local deliveries is rooted in an entirely different infrastructure.
But what if the AmazonFresh experiment proves successful? There are several other metropolitan markets starving for an established online grocery-delivery service. My wife still laments the day that PublixDirect called it quits four years ago in Miami. At the time, Publix argued that there just weren't enough customers to make the service financially worthwhile.
However, a lot has happened since many of the online grocery services went kaput. Broadband coverage is wider. The masses trust online merchants. No one knows this better than Amazon. If someone is going to build the better Webvan, it may as well be market darling Amazon.