Amazon prepares to take bite of huge US food market

The Guardian, LONDON

Fri, Jun 07, 2013 - Page 15

Amazon is reported to be gearing up to take on another sector — the US$1 trillion a year US food market. The move will disturb critics already concerned about Amazon’s growing dominance in everything from books to electronics.

The firm has had a grocery service called Amazon Fresh for six years that operates in its hometown of Seattle, delivering groceries with its own fleet of trucks. According to Reuters, the company is now preparing to roll out the service in California, starting with Los Angeles and San Francisco, and could launch in 20 other urban areas — inside and outside the US — next year.

Amazon has declined to comment on the report, but retail experts see a move into groceries as likely and do not expect Amazon to stop in California.

“I’ve been studying this company for a long time. Their experiments start here, the next place they go is a developed market like the UK or Japan,” Bill Bishop of online retail consultant Brick Meets Click said.

Any Amazon grocery push is likely to prove controversial. Retailers large and small in the US and Europe have complained that Amazon is pricing them out of the market. French Minister of Culture Aurelie Filippetti recently called Amazon a “destroyer” of bookshops.

“Everyone has had enough of Amazon which, by dumping, slashes prices to get a foothold in markets only to raise them once they have established a virtual monopoly,” she said.

Bishop said Amazon was uniquely qualified to make inroads into online grocery thanks to its already massive distribution network, customer loyalty and ability to sell other products alongside food. He added that Amazon has a “voracious appetite” for growth.

Amazon Fresh started in 2007 as a limited test on Mercer Island, Seattle. The division has not been a success financially, but Amazon founder Jeff Bezos said last month that it had “made progress on the economics over the past year.”

Expansion in the US would be aided by one of the most sophisticated distribution chains in the world. Amazon has opened nearly 20 new distribution centers since 2010 across the US, almost doubling its total, and has pledged to build up its next-day delivery service. Refrigeration has recently been added to the company’s California warehouses.