The Real Business Rationale For AmazonFresh

AmazonFresh, the grocery operation that's been trialed in Seattle since 2007, is focused on building scale—with an eye on laying a same-day delivery foundation—rather than generating profits, according to RetailNetGroup. Industry watchers have been skeptical about online grocery models. Other than the modest success of FreshDirect and Peapod, the segment has seen a string of generally failed ventures, the story reported. Although grocery may not initially seem to make sense as a same-day delivery trial, the story argues that it does. As a standalone business model, it's challenging to make money delivering low-dollar, low-margin, and occasionally heavy CPG products to doorsteps one or two items at a time. Adding full-basket grocery would drive more economies. And adding grocery delivery helps Amazon justify its own fleet of temperature-controlled trucks set to roam urban cities. Also, Amazon views steady grocery delivery as a powerful way to drive frequent customer interaction and it opens up avenues to entice consumers to shop for other products with each order. Story

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