NOVEMBER 2006 IN
RICK ASTER’S WORLD

Remote Groceries

Amazon, the place known for selling books and movies online, is now introducing its approach to the grocery business. I thought I would give it a try.

The Amazon Grocery Experience

Other grocery web sites have emphasized broad selection and quick delivery, albeit within a limited delivery area. Amazon is taking the opposite approach. Allowing a few weeks for delivery means they won’t be selling anything that has to keep cool or otherwise has a short shelf life. But by selling products in factory carton quantities, Amazon hopes to eliminate most of the product handling that takes place in a supermarket and thus reduce its costs enough that it can offer discounts to its customers.

The carton-quantity approach might discourage discount-hunters. Would you pay $27 for cookies? Or $30 for breakfast cereal? You might, if you read the fine print that says you’re getting 6, 12, or 24 retail packages in the carton you’re buying. This is not the token multipack approach you might find in warehouse clubs, where they might tape two cereal boxes together — you’re getting the actual cardboard box that was sealed at the factory.

Finding grocery items at Amazon is quicker than tromping around the supermarket. You can search by keyword and read ingredients and nutritional panels faster than you can on the actual product packaging. In a couple of minutes I had selected and purchased hard-to-find brands of cookies and toaster pastries. The boxes turned up on the porch the next week.

Did I get good prices? By qualifying for free shipping at Amazon, I paid less than I would have paid at the supermarkets I regularly visit, but not a lot less. It was kind of like a buy-11-get-one-free offer, not very exciting by supermarket standards. Consider that it could take six months to consume the 876 cookies and 144 toaster pastries I got, and it’s not a great bargain, economically speaking. But it’s not bad either.

Economies of Long-Distance Groceries

The obvious advantage of the Amazon Grocery approach is that you can buy food items that your local grocer might overlook. Can’t get Weetabix in your town? If you can buy them on a web site you don’t have to take a trip to get them. Don’t know where to find peppermint oil or whole barley? Well, unfortunately, Amazon doesn’t either, so while they can connect you with some of the smaller food makers, they don’t really connect you to the world of food.

Economically, a remote grocer has to overcome a fundamentally higher shipping cost, as they ship boxes in a industry built on truckloads. This disadvantage could shrink in the future, though, as shipping becomes more automated. It’s the need to streamline shipping that limits Amazon to selling whole cartons of food, but this also very much limits the scope of what they can sell.

You couldn’t buy all the non-perishable grocery items for a household online in carton quantities unless you had a room-sized pantry. It’s hard to appreciate how much space six boxes of cereal occupy until you actually hold the six boxes in your hands and look for a place to put them on the shelf. And Amazon will never replace the regular trips to the supermarket for the perishable items that form the heart of a typical shopping list. But in specialized situations, a remote grocery might:

Supermarkets don’t need to worry about the new competition from Amazon, but the Amazon approach to groceries may have a place in the food distribution chain.


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