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June 5, 2013

Amazon to Take Stab at Online Fresh Food Business

E-retail giant is planning a massive expansion of its online grocery business into as many as 40 markets.

AmazonFresh, which currently is run only in Seattle, will soon expand to Los Angeles — possibly this week — and to San Francisco later this year, sources told Reuters.

Amazon has been getting a feel for the fresh food retail business in its hometown of Seattle — it has been delivering fresh produce and other foods with its own trucks throughout the city for more than five years.

If the L.A. and San Francisco ventures are also successful,  the company could potentially launch AmazonFresh in another 20 metropolitan areas next year in the U.S. and beyond, Reuters sources said.

New warehouses with refrigerated areas for food, as well as space to stock up to one million general merchandise products are part of the plan, the sources added.

Supermarket analyst and consultant Bill Bishop told Reuters, however, that Amazon has a goal of 40 markets.

“Amazon has been testing this for years and now it’s time for them to harvest what they’ve learned by expanding outside Seattle,” Bishop is quoted by Reuters.

“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. That’s an awesomely scary prospect for the grocery business.”

This means Amazon can deliver chicken, lettuce and apples alongside other often-used products such as diapers, dog food and vitamins as well as electronics, books and Bluerays.

This is not good news for online food services and grocery stores, but it could even hurt delivery companies such as FedEx and UPS because Amazon will deliver the perishable items with its own trucks, which could, in time, lead to a fleet of company delivery trucks for both food and non-food items, the report points out.