Amazon Getting Into the Grocery Deliver Game

A blog about business and economics.
June 4 2013 4:14 PM

Look Out, Supermarkets—Amazon's Coming to Destroy You While Losing Money Delivering Groceries

An Amazon employee at Chalon-sur-Saone, central eastern France.
An Amazon employee at Chalon-sur-Saone, central eastern France.

Photo by Philippe Merle/AFP/Getty Images

As I've said time and again, the worst thing that can possibly happen to your business is for Amazon to enter your market as a competitor. They don't make money and they don't care. Now here they come to destroy the supermarket industry:

Amazon is searching for 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, which generated $568 billion in retail sales last year, may be a ripe target.

Amazon's strategy is to grow, grow, grow, grow, grow, and the fresh groceries market is a growth opportunity. Some misguided naysayers think it won't work:

Roger Davidson, a former grocery executive at Wal-Mart, Whole Foods and Supervalu, said Amazon will struggle to make money from AmazonFresh because fresh produce can easily go bad in storage warehouses and get damaged during delivery—something known as "shrink" in the business.

This completely misunderstands Amazon's corporate strategy. They struggle to make money from Prime streaming video. They struggle to make money from Kindle hardware. They struggle to make money in all their lines of business, which is why they don't make money. What Amazon makes is sales. And they're really good at it. I buy lots of stuff from Amazon as it stands, and I can't wait to start using them for grocery delivery, too. I just hope my city is one of the places where they roll this out. Grocery delivery service already exists in D.C., but it's pretty crappy and I'm sure Amazon can do better with it. Can they make a profit with it? I don't care and they don't care either. But if I were a supermarket executive, I'd be trembling with terror right now.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.



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