Saturday, February 24, 2018
Business

If Amazon's online grocery service lands here, supermarkets may revive home delivery

Will the soon-to-be-sold Sweetbay supermarket chain become Winn-Dixie or perhaps Bi-Lo stores?

Who cares? Before we get too wrapped up in the small stuff of this grocery market, consider this:

Online retailing juggernaut Amazon plans to expand its food delivery service called AmazonFresh to as many as 40 major markets — which may well include Tampa Bay — within the next few years.

In the Seattle market, Amazon has delivered fresh products such as eggs, strawberries and meat with its own fleet of trucks for five years. It will push into Los Angeles this month and the San Francisco Bay area later this year.

Amazon wants to find new, large markets to enter as the company tries to maintain a growth rate that has fueled a 220 percent surge in its shares over the past five years. The grocery business in the United States generated $568 billion in retail sales last year and may be a ripe target, said Reuters, which Tuesday first reported Amazon's plans to expand while quoting anonymous sources. Amazon had no comment.

"The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time," Bill Bishop, a prominent supermarket analyst, told Reuters. "That's an awesomely scary prospect for the grocery business."

Okay. I know. Online grocery services have been tried for many years by many companies and business startups with little lasting success. Longtime Times retail reporter Mark Albright, now retired, asked the right question about online supermarkets back in 1998 soon after the masses embraced the Internet.

"Would you trust a stranger to pick your perishables, everything from T-bones to tomatoes?" Albright wrote. "But now many supermarket industry leaders are coming to believe that some day the Internet will be a competitive threat."

Bingo. Grocery stores understood even 15 years ago what was coming, even if they did not expect Amazon to be their potential competitor. Back in '98, four-year-old Amazon already was the online shopping leader but had yet to turn a profit.

Times have changed. Amazon is not only profitable now. It is also big, richer and experienced in how to make online retailing services work. And it is well known for disrupting traditional retail markets with innovative ways to provide new services. Witness how Amazon's online book discounting and its Kindle e-book reader, first introduced in 2007, helped shake up brick and mortar book chains, including Borders and its affiliated Waldenbooks.

Tampa Bay's supermarket business already is in flux. The struggling Tampa-based Sweetbay chain was picked off this month by Bi-Lo (the deal closes later this year), while the future of what's left of Winn-Dixie, Albertsons and other less focused chains remains unclear.

In Seattle, customers of AmazonFresh send in their online grocery lists. People can order at night and have food delivered before breakfast. Or they can order dinner during lunch break.

AmazonFresh offers a "one-stop shop" that lets customers order specific items from different stores in the area. Delivery is free if the purchase is large enough (it varies by ZIP code).

Prices appear to be comparable to a regular grocery: $3.99 for a gallon of 2% milk; $2.84 for a dozen large eggs.

The AmazonFresh website reminds customers it is happy to deliver more than food. "Choose from thousands of Amazon.com items in books, electronics, toys, kitchen items, and more and save yourself another trip."

The push into groceries could also spur the rise of a broad-based delivery service employing Amazon trucks to deliver directly to homes. That could have implications for UPS, FedEx and other package delivery companies that currently ship Amazon goods.

AmazonFresh isn't ready to confirm it's coming to Tampa Bay. But if it is pushing into 40 major markets, it seems likely since this metro area easily qualifies by size.

That might pose an unexpected challenge to even the bigger, well established grocery chains here like Publix Super Markets or Wal-Mart. In 2001, Publix started an online grocery service called PublixDirect, charging $7.95 to deliver food orders to customers. By 2003, Publix had seen enough and killed the South Florida service. It never reached Tampa Bay.

On Tuesday, I told Publix what I was writing about and asked about its more recent online experiments.

In response came a terse e-mail from media spokesman Brian West: "Publix is not testing any online ordering and delivery at this time."

Fair enough. But if AmazonFresh starts gaining customers, you can bet that every major grocery chain in Florida will be back to the online drawing board.

Contact Robert Trigaux at [email protected]

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