Published on: January 28, 2013by Kevin Coupe
The Seattle Times has a piece about Amazon Fresh, noting that the experiment - selling fresh products, many of them from local purveyors, and delivering them in Amazon-owned vans - that started in 2007 remains an offering limited to some 80 Seattle-area zip codes.
"A broader rollout of Fresh once seemed unlikely as Amazon’s reluctance to charge customers sales taxes prevented it from putting down roots in most parts of the U.S.
That changed in 2011, when Seattle-based Amazon began cutting deals with states to collect sales taxes, paving the way for new distribution centers near major urban hubs, including New York and San Francisco.
"While an expanded distribution network could lay the groundwork for Fresh to go national in 2013, it remains to be seen whether its lime-green trucks head elsewhere anytime soon.
"Analysts say Amazon has yet to crack the code on how to deliver mass-market groceries at prices that enable it to both compete for customers and turn a profit. What’s more, they say, Amazon must convince customers to put aside their misgivings about buying perishable food sight unseen."
This is interesting, since I've heard rumblings that Amazon actually is on the verge of expanding Fresh into Los Angeles and/or San Francisco, possibly as soon as this summer, a decision that - in addition to the fact that Fresh has finally gotten to the point of profitability because of increased minimum purchases and increased delivery fees - has been driven by an increased number of distribution and new cross-docking facilities.
I've also found it revealing that Amazon, building on what it calls its "Big Radish" program in Seattle, which offers free shipping to high-frequency users spending at least $50 per order, also may offer a version of its Prime program retooled for Fresh membership - pay a monthly fee of, say $20, and get lower minimums and no delivery charges. (Using the highly successful Prime program as an engine to drive growth is a very smart idea, I think.)
Amazon also seems to have done a good job of addressing the whole "sight unseen" issue by using reputable, well-known purveyors as sources of product. You're not buying Amazon's croissants or Amazon's deli meats or Amazon's prepared meals, but rather products that have other companies' names and reputations standing behind them. This concept has proven to be successful in Seattle, I'm told, and will be replicated elsewhere.
There remain a number of people who believe that Amazon Fresh is a mistake - that it will take the company down an unprofitable road that is fraught with marketing and operational potholes, where the carcasses of companies like Webvan can be found decaying in a variety of virtual ditches. And certainly that is possible.
But I keep remembering this line from Amazon's recent commercial (which seemed to double as a marketing manifesto):
"What once was wildly impractical is now completely normal. And normal just begs to be messed with."
When I think about that line, it seems to me that there is almost no way that Amazon does not take this leap with its Fresh program. Call it arrogance, call it ambition, call it anything you like. But grocery shopping does, in fact, just beg to be messed with. It won't be for everyone ... but then again, neither was the concept of buying books and and music online when the company started almost two decades ago.
- KC's View: