Amazon, Wal-Mart unveil online grocery shopping program

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June 12, 2013, 10:31 am
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(NECN/NBC News: Courtney Reagan) - Amazon is getting into the grocery business.

The online retailer is reportedly planning a major roll-out of a grocery delivery business it's been developing for years.

Americans spend $565 billion a year on groceries. After all, everybody eats, every day, more than once.

Now Amazon and Wal-Mart are escalating the national food fight.

Over the last 24 hours, Los Angeles was quietly added as the second delivery area for Amazon's online grocery delivery service, "Amazon Fresh". The online retailer has been testing Amazon Fresh in and around its home city of Seattle for at least five years. Reportedly, Amazon is looking to expand its online grocery business to San Francisco later this year, and 20 more areas in 2014. Amazon did not return requests for comment and hasn't confirmed the reports of expansion.

Joe Feldman of the Telsey Advisory Group said "If somebody can save you time by shopping those aisles for you, and then ship it and bring it to your house, that's pretty compelling. Now can Amazon do it effectively and profitably? Time will tell."

Most analysts agree it would be easier for Amazon to gain market share in dense urban markets, easier to serve with delivery than suburban or rural households, and whose residents tend to shop for groceries more at traditional grocers than at super-stores like Wal-Mart.

Wal-Mart already sells more groceries than any other U.S. supermarket, just $7 billion less than the annual revenues of Kroger, Safeway and Supervalu combined. The discounter has been airing grocery price comparison commercials, working with First Lady Michelle Obama to offer healthier food options and just announced a new produce freshness guarantee program.

Grocery, online or off-line, is a low profit business. The real profit would likely come from shoppers adding other non-food goods to the cart. Many speculate Amazon and Wal-Mart’s real goal with grocery is enticing consumers to add a DVD or two on the way to check-out.

Tags: Amazon, shopping, online, Wal-Mart , grocery shopping, Courtney Reagan, Amazon Fresh
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