Amazon

Amazon dives deeper into tech to go after Walmart

Reuters

 (Reuters)

As Amazon expands further into the enormous grocery market, it's launching stores letting users pick up groceries straight from their car, swiping at one of Walmart's last advantages.

Amazon unveiled a pick-up delivery service known as AmazonFresh Pickup, letting its users order groceries online and then pick them up in as little as 15 minutes after the order is placed, far surpassing the two to four hour window its physical competitors have promised.

Currently, the service is only available in Amazon’s two Seattle stores and is available to its employees in initial testing, but it will soon wind up being another perk for Amazon Prime members.

Below is a video on how the service works:

 

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Amazon has never publicly disclosed how many people use its $99-a-year Prime service, but estimates put the number at close to 65 million worldwide.

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The move into delivery pick-up expands Amazon’s opportunities, as it looks to capture market share in the online grocery market.

By 2025, online grocery spending could account for 20% of the market, worth approximately $100 billion annually, according to a report from Nielsen and FMI. At that level, it would represent the size of 3,900 grocery stores. Combined, Walmart, Kroger and Target have approximately 9,500 stores in the U.S., so any sizable impact from Amazon’s online operations could have a negative impact to store count for the aforementioned retailers.

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Over the next decade, online grocery sales are expected to grow at an annual rate of 20% and companies that understand the shift of e-commerce taking over grocery sales will stay ahead of the competition."Only the retailers that first develop an understanding of their digitally engaged shoppers, build a strategy around that understanding and cost-effectively integrate digital food retail into their banner and channel promise will be market leaders," the Nielsen/FMI report said.

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The move to add a "pick-up-and-go" service, designed to eat away at the advantages of Walmart, Target and other physical retailers, is a sign of Amazon’s desire to win at all costs, even in an industry that’s as inherently low-margin as groceries.

Pacific Crest analyst Edward Yruma said the offering was consistent with what has been expected of Amazon. “Walmart, Kroger and others have been clear in the success of the “click-and-collect” model; we think pickup can actually be more convenient for grocery instead of delivery,” Yruma wrote of the offering prior to its announcement.

Currently, users can get “thousands of grocery items available at low prices,” including things like meats, fresh produce, bread and other essentials. 

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Amazon appears among the best to capture a significant portion the online grocery shopper, just as they’ve done with other areas of e-commerce, cloud computing and video. This is by and large due to its intense focus on customer experience and ease of use, making its future exceedingly bright, according to analysts.

“Net/net, [Amazon] is likely to be one of the first trillion-dollar market cap companies,” Barclays analyst Ross Sandler wrote in a recent investor note. “[I]t's just a question of when, not if, in our view.”