Sun, Feb 11, 2018 - Page 16 News List

Amazon launches grocery war in cities


The Amazon-fueled grocery price war might have finally arrived.

News that Inc is to start offering two-hour delivery from Whole Foods Market Inc stores in four US cities has the food world buzzing that competition is about to heat up in an industry that survives on razor-thin margins.

In the six months since Amazon acquired the organic grocer, the e-commerce giant has been mum about its plans for its ballyhooed push into brick-and-mortar food retail.

The grocery world will now get a firsthand look at Amazon’s strategy, with two-hour delivery available through its Prime Now service in Dallas and Austin, Texas; Virginia Beach, Virginia; and Cincinnati, Ohio.

Those cities are to be the initial battlegrounds and there are plans to roll out the service nationwide.

As Amazon expands two-hour delivery, it could be a turning point for buying food online, Bloomberg Intelligence analyst Jitendra Waral said. “One of the biggest things holding back online grocery is the option of free delivery and the speed.”

The grocery push, which has fueled pessimism about traditional competitors like Kroger Co and Albertsons Cos, is only part of Amazon’s expanding ambitions.

The company has over the past few weeks rattled the healthcare industry and on Friday weighed on the shares of shippers with plans to start a delivery service rivaling United Parcel Service Inc and FedEx Corp.

There are about 60 million households in the US that use Amazon’s Prime service, and only about 22 percent of those shopped at Whole Foods in December last year, according to research from Cowen & Co.

Prime is available in about 30 major cities and Amazon is to start to chip away at the estimated US$1.3 trillion grocery market in the US as its delivery capacity grows, Cowen said.

“There is a lot of runway and we expect continued Prime penetration with Whole Foods customers,” John Blackledge said in a research note.

Prior to the delivery announcement, Amazon had not said much about its plans for Whole Foods, other than generating headlines with price cuts on a handful of items.

Still, after watching the company ravage other corners of the retail landscape, grocers have been investing in technology and making the case that they can thrive as more food purchases move online.

Amazon has tried for at least a decade to crack the code on delivering fresh food, with little success, and recent stocking issues at Whole Foods prompted analysts at Barclays PLC to earlier this week say that pressure on competitors in the industry had “abated.”

Now, in least in four cities, pressure will ramp up.

Amazon Prime Now has about 50 distribution centers it uses to ship orders to its urban customers. If the service rolls out across Whole Foods stores, it would have another 475 locations to use for shipping orders, research from RBC Capital Markets analyst William Kirk showed.

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