Amazon expands online grocery arm

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News and insight for North America's fresh produce buyers
Mike Knowles

BY MIKE KNOWLES

@mikefruitnet

Amazon expands online grocery arm

AmazonFresh service to be extended to Los Angeles and San Francisco as online retailer aims to outperform other providers

Multinational online retailer Amazon is said to be planning a major roll-out of its internet grocery business, according to news agency Reuters quoting two unnamed sources.

The agency said Amazon.com Inc, which launched Amazon Fresh as a trial in Seattle six years ago using its own trucks, is on the verge of extending that service to California – possibly to Los Angeles "as early as this week" and the San Francisco Bay area later in the year.

The group is apparently aiming to outperform similar online grocery services by bundling them with deliveries of higher-margin items such as electrical goods, and is said to be developing distribution centres that will incorporate refrigerated areas for food.

"If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States," one of the sources told Reuters.

The major concern for the fresh produce business will be Amazon's purported plan to use fruit, vegetables and other fresh foods as loss leaders, pushing down prices to encourage shoppers to use their service and purchase higher-value products at the same time.

"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," said retail analyst Bill Bishop. "That's an awesomely scary prospect for the grocery business."

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