Amazon Fresh expands to San Francisco market - The Packer

Amazon Fresh expands to San Francisco market

12/18/2013 10:32:00 AM
Tom Karst

“They know how to get product from point A to point B,” said Dick Spezzano, owner of Spezzano Consulting Service in Monrovia, Calif. Younger consumers who are wed to their smart phones may be natural targets for the business, he said. “(Younger consumers) want it when they want it and they are willing to pay for it,” Spezzano said. “Now is the time for it to work,”

The Amazon Fresh rollout is limited to select zip codes in San Francisco but is a beachhead for future growth, said Bill Bishop, chief architect of Brick Meets Click and chairman of Barrington, Ill.-based Willard Bishop Consulting.

Bishop said it appears Amazon Fresh intends to start its offer with high end consumers and working back toward middle income consumers. “They are going to work out the details of the experience starting at the Lexus and building smaller cars, using an analogy,” he said.

The company’s extensive network of distribution facilities will allow food to be added to trucks already being sent out. “By combining food, which has a high frequency of purchase, with some of the lower frequency purchases like books, that allows them to build out a better network,” Bishop said.

If successful, Spezzano predicted that Amazon Fresh won’t easily be acquired or purchased by someone else. “These guys will be the 800-pound gorilla in every room.”

San Francisco won’t be the last market Amazon Fresh expands, Bishop said, In fact, Bishop said there are reports that an Amazon Fresh truck has been spotted in Chicago. In addition, Amazon Fresh announced in October it will open a 1 million square foot fulfillment/distribution center in Kenosha, Wis.

The existing presence of Peapod home delivery in the Chicago market will makes the city attractive to home delivery business models because many customers are familiar with the model. “We have a base of shoppers in Chicago familiar with online buying makes more receptive to the market offer,” he said. Bishop said some retailers aren’t taking seriously the competitive threat of online buying/home delivery of groceries. “I’m not seeing any great rush to get ready,” he said.

Bishop said that online buying and home delivery may appeal to a mix of customers, including time-starved working parents, millienials and some older shoppers.

The Amazon Fresh model of charging a yearly fee may encourage more use as opposed to tacking on a delivery charge every time, Bishop said. “At the end of the day, it is use that is driving their business,” he said.

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