Tuesday, July 4, 2006

Amazon forays into online groceries

When Jeff Bezos said Amazon would be the store where one can buy anything, he really meant it: the e-commerce powerhouse quietly beta-launched its groceries tab.

The section includes 12 categories of nonperishable goods such as cereal, pasta and canned soup. The new category also includes merchandise from a variety of well known consumer brand manufacturers such as Kraft, Kellogg and Betty Crocker.

The online grocery business is regional, can be very dependent on local and regional suppliers for perishable goods and is hard for a national player to establish as a profitable business.

It isn’t clear if Amazon will eventually sell more perishable items such as meat and produce, but we can be sure they are making a very calculated move into the online grocery market in a way that could result in a very profitable business over time. They are selling higher margin items in their specialty lines and setting minimal purchasing requirements with lower margin products.

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