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Signs are pointing to an expansion of Amazon's grocery delivery service to the Bay Area
Is AmazonFresh coming to San Francisco? All signs point to yes, based on several recent truck sitings as well as a job posting. Now AllThingsD is reporting that sources have confirmed that AmazonFresh will be announcing its San Francisco debut on December 10.
AmazonFresh has been slow to expand and currently only delivers in select zip codes in Seattle and Los Angeles. The service, which costs $299 a year, allows users to order everything from organic produce and grass fed beef to milk and free-range eggs for same-day or next-day delivery. Users can even narrow down their search to only include items that are gluten free, dairy free, vegan, soy-free, high fructose corn syrup-free, and so on.
Users who order by 10 a.m. can get their groceries delivered on the same day, or they can get their order first thing the next morning if they order by 10 p.m.
Users in Los Angeles must be Prime members to use the service, which comes with the perk of getting a free 30-day trial. Hence the name PrimeFresh in LA, while Seattle’s service is just AmazonFresh.
Amazon initially started delivering groceries in the Seattle suburb of Mercer Island in 2007 and only expanded to Los Angeles in June of this year. (I actually saw my first AmazonFresh truck while in Seattle last month, and the exhilaration I felt was like spotting a rare exotic bird.)
The grocery industry has notoriously low margins—which, of course, is not foreign to Amazon, but it is likely the reason for AmazonFresh’s sluggish expansion. The average supermarket has a profit margin of just 1%, which means volume is the key to making a profit. Grocery chains typically have to sell high volumes of goods in order to make any money.
Jeff Bezos told Charlie Rose in a 60 Minutes interview that the company has been slow to expand AmazonFresh beyond Seattle because it needed to “make financial sense.”
Amazon seems to be onto something with PrimeFresh and requiring new customers to be Prime members to use the service. Typically, grocery stores will mark down a staple item or even take a loss on it in order to draw in more customers in the hopes that they’ll buy more. Amazon is essentially doing the same thing: go to Amazon for groceries, stay for free movies and two-day shipping.
Amazon is no stranger to breaking even or taking a loss on one item in order to boost sales of another. Once upon a time, it paid full price for e-books and sold them at a loss for $9.99 to promote sales of its Kindle e-reader. These days, it’s the opposite: Amazon breaks even on Kindle sales in order to promote content sales.
AmazonFresh will have some competition in the grocery delivery business, though. San Francisco already gets grocery delivery services from companies like Instacart, SPUD.com, Google Shopping Express, Envoy, and, of course, Safeway.
The Amazon-owned Quidsi currently offers a grocery selection consisting of dry and packaged goods via Soap.com.
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