GeekMBA360

“Not Webvan or Homegrocer.com all over again. Grocery delivery is extremely low margin. It’s not going to work.” That’s my initial reaction when I first heard about Amazon Fresh, amazon.com’s grocery delivery service.

But, Amazon Fresh has really impressed me. Amazon Fresh started to deliver grocery in limited number of zip codes in the Seattle area. It then expanded to more zip codes. Recently it started to deliver to my neighborhood. By the end of 2009, it’ll deliver to the entire Seattle area.

I can now order meat, vegetables, fruits, diapers, detergents, diary products, etc. It’ll save me at least 3 hours a week. That’s 156 hours a year. We’ll have more time to read, exercise, play with the kids, enjoy family time.

We have two little ones at home. There are times that after a full day of work and several hours of playing, bathing and putting kids to bed, I had to drive to grocery store because we run out of milk or diapers or whatever although I was exhausted.

If there is one thing we need more, that’s TIME. Plus, grocery shopping is not exactly my favorite activity.

Amazon Fresh works beautifully.

• If I order before mid-night and choose the “pre dawn” delivery option, the grocery will be left at my door stop by 6AM in a temperature controlled box.
• During the day, as long as I order 7 hours in advance, I’ll get same day delivery.
• I can set up automatic delivery for items that runs out periodically (e.g. milk, diaper, etc.). I’ll get 10-15% discount for automatic delivered items.
• There is a requirement for $30 minimum purchase. The delivery cost is $5 for purchase under $75. But, if I made enough purchase, I’ll be qualified for free delivery in the following month.

I’ll make fewer trips to Costco, Trader Joe’s, and Fred Meyer’s. I think Amazon Fresh is going to steal market share from these grocery stores.

I’m also very impressed by amazon’s execution. They worked hard to avoid Webvan’s mistakes. Amazon hired a former Webvan executive to run their grocery business. They have a very limited marketing budget to limit cost. It rolls out its service in only one geographic area (i.e. Seattle) to limit the infrastructure cost and test the concept. I also notice that Amazon Fresh’s price is a little bit higher than traditional grocery stores. But, for the convenience and time saving, I think many people are willing to pay.

I also think that amazon’s ability to deliver on the same day is going to be huge. Once they build up the infrastructure in all major cities in the United States, they’ll be able to control the “last mile” of delivery.

Amazon Fresh is “Costco meets FedEx”. I don’t know Amazon Fresh’s revenue and profit. But, if amazon can make it economically viable,  it could be a game changer that fundamentally disrupts many traditional businesses.

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