Amazon.com Inc. today confirmed its first foray into grocery retailing at the bricks-and-mortar level. The e-retailer has opened two pickup points for groceries ordered online as part of AmazonFresh, the e-grocery service available only to Amazon Prime members. Consumers can opt to pick up their groceries, which include perishables, when they are out and about rather than have them delivered.
Called AmazonFresh Pickup, the points are in the Ballard and SODO (south of downtown) neighborhoods of Seattle, Amazon’s hometown and the city where e-retailer originated the Fresh program in 2007. The pickup points aren’t fully open yet—Amazon says they are still in beta test mode with Amazon employees. Amazon has more than 25,000 employees in Seattle and is No. 1 in the Internet Retailer 2016 Top 500 Guide.
It is the same test-and-learn method Amazon is using for Amazon Go, a convenience store located near Amazon’s headquarters that has no checkout lanes and opened to Amazon employees in December and has yet to open to the public. The sensor-filled store communicates with an app on the shopper’s smartphone already tied to their payment information.
With AmazonFresh Pickup, Amazon says Prime members can place their orders and schedule a pickup time as soon as 15 minutes. When the consumer arrives at AmazonFresh Pickup, she pulls into a covered pickup slot and her groceries are loaded into her trunk.
Many traditional supermarkets are deploying the pickup model for online orders, as home delivery of perishable products is logistically tough. Wal-Mart Stores Inc. offers its e-grocery service Walmart Grocery in more than 30 metropolitan areas in the United States, and is quickly adding more markets. Kroger Inc. offers e-grocery ordering for store pickup in more than 640 stores. Wal-Mart is No. 4 in the Top 500. Kroger is No. 83.
The market for online groceries—defined as food and beverage and other consumables–is growing rapidly. Internet Retailer’s first-ever 2016 Online Food Report documents how the online sale of food is suddenly a booming market and puts to rest the notion that food retailing is the exclusive province of stores. Investment banking firm Cowen & Co. expects grocery to be among the sectors driving overall e-commerce growth through 2022, according to report it released earlier this month. It says online grocery sales in the United States likely will grow more than twice the rate of overall e-commerce in 2017—34%, versus 15.5%, respectively. It estimates 12% of U.S. grocery shoppers bought groceries online last year.
Cowen also predicts Amazon will become the ninth-largest U.S. grocer this year and be No. 3 by 2021, behind Wal-Mart and Kroger.
Amazon launched AmazonFresh in 2007 in Seattle. It did not expand beyond Seattle until 2013. It more than doubled the number of markets it offered AmazonFresh in last year and is now available in more than a dozen U.S. metropolitan areas, including New York, Los Angeles and Chicago. It is also available in London. Only Amazon Prime subscribers can order from AmazonFresh. U.S. consumers pay $99 annually to join Prime, which gets them access to fast free shipping options and other benefits, including streaming video and music, online photo storage and early access to select shopping deals. Prime members pay an extra $14.99 monthly to use AmazonFresh, but pay no additional fee for delivery of the grocery items they order. There is no fee to use AmazonFresh Pickup.
In addition to the AmazonFresh Pickup locations and the Amazon Go store, Amazon operates five physical Amazon Books stores—with another five planned—and locker-based pickup points for regular Amazon.com orders at 16 university campuses, with more planned for 2017.
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