Amazon (NASDAQ:AMZN) has purchased a one-million-square-foot New Jersey grocery warehouse and is refurbishing it for a 2014 launch of AmazonFresh in the New York City area, a financial analyst reported on Wednesday (Aug. 7).
The warehouse, which was formerly operated by C&S Wholesale Grocers, includes space that's capable of storing fresh food and is less than 50 miles from all five New York City boroughs, southern Westchester County, and most of central New Jersey, according to SunTrust Robinson Humphrey analyst Robert Peck, who tracks Amazon.
In a note to investors quoted by Business Insider, Peck wrote, "We believe, based on our research, that a developer partner of Amazon has purchased ~1m square feet of warehouse space in a prime NJ location and raised capital to renovate and improve the facilities. Amazon is the planned tenant for the larger ~526k sq ft. facility, while the remaining ~ 401 k sq ft. complex, which houses refrigeration capabilities, remains vacant."
Peck continued, "It is our opinion that Amazon will be the tenant for the second building as well following the large capital raise by its partner to refurbish this unit capable of storing perishable goods (previous tenant was C&S Wholesale Grocers), and serve as its center for Fresh in the NY metro area."
Amazon has been testing grocery delivery in Seattle for five years, and expanded the service to some parts of Los Angeles in June. However, the New York City area includes a different set of challenges, with several local grocery delivery services that have already established themselves, including FreshDirect and Ahold's subsidiary Peapod. The advantage to much of the NYC area is population density and the opportunity to include more customer orders per mile. The disadvantage: Population density and the traffic that comes with it (Brooklyn and Queens can be a much longer trip than that 50-mile radius implies).
That said, if Amazon can crack the grocery delivery model in both Los Angeles and New York as well as Seattle, it should have the template it needs for same-day delivery service in most U.S. cities—for groceries or anything else.
- See this Business Insider story
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