Amazon is planning a major roll-out of an online grocery business this week after quietly developing it for years, sources tell Reuters. The new services, called AmazonFresh, could be available in 20 other urban areas, including some outside the US, by next year.
The online retail giant has been testing AmazonFresh in Seattle for the past five years and could expand to Los Angeles as early as this week, the report notes. The San Francisco Bay Area would be the second market later on this year and if all goes according to plan, Amazon will roll out the service in another 20 markets in 2014.
Amazon has been looking for new business opportunities to keep the company's share prices climbing. The grocery business in the U.S., which generated $568 billion in retail sales last year, makes an attractive target. Amazon might be hoping that consumers will order other goods along with the groceries.
Sources familiar with AmazonFresh's expansion plans said new warehouses will have refrigerated areas for food, but also space nearby to store up to one million general merchandise products, in some cases.
Meanwhile, current competitor Wal-Mart is already testing same-day and next-day delivery of online grocery and general merchandise orders in the San Francisco Bay Area.
Selling fresh fruits and vegetables online is a difficult business that comes with expensive costs, like fuel-hungry refrigerated trucks, which leads to small margins. But Amazon's move into online groceries isn't really about making money. Instead, it is seen as a way of making Amazon's burgeoning same-day delivery service more cost efficient
