Editor's Note: Amazon.com CEO Jeff Bezos' surprise purchase of The Washington Post is a personal investment, reportedly not related to Amazon. The following story is about Amazon.com. For more on Bezos's takeout of WAPO, see Chris Ciaccia's story on the subject: Washington Post Sold to Jeff Bezos for $250M.
NEW YORK ( TheStreet) -- In March 2011, the visionaries over at Seeking Alpha rejected an article I wrote about Amazon.com's (AMZN) foray into grocery delivery. That's why I published it as a blog, where rejected SA articles go to die.
All of a sudden, Amazon Fresh is not only a relevant story, it could become an increasingly important part of Jeff Bezos's seemingly wide-ranging, but ultra-focused strategy. Bezos wants the tentacles of the Amazon ecosystem to touch your life in some way, shape or form as often as possible.
After a roughly six-year pilot program in the Seattle area, Amazon Fresh debuted in and around Los Angeles this past June.In 2011, I asked Will Amazon Fresh Go The Way of Webvan? If not the biggest dot-com bust of the early 2000's, Webvan was one of the better poster children for things that went wrong during that time:
As a San Francisco resident from 1999 to 2006, I recall, with fondness ... -- Webvan. The company blew its venture capital and IPO money on everything from television spots during the Oscars to a $1 billion warehouse and more than 100 swanky Herman Miller Aeron chairs. To make matters worse, former CEO George Shaheen walked away with a golden parachute that pays him $375,000 a year for the rest of his life.While I could not confirm it, I assume Shaheen, who turned 69 last month, still collects that check. In any event, under the radar since I discovered it in early 2011, Amazon made Webvan "part of the Amazon family." At least Webvan.com, which remains active today. You can order a whole slew of non-perishable grocery items via the Website just as you can Amazon.com. But now, if you live in select areas of the Seattle and Los Angeles metropolitan regions, Amazon gives you Webvan-style service, delivering everything from non-perishables to produce, meat and dairy. You name it. I live in Santa Monica -- part of Los Angeles County, but it's own city -- and Amazon offers "Fresh" in my zip code. In the past week, I have seen trucks on two occasions -- driving through my neighborhood and, as captured below, in Santa Monica's Downtown core. Amazon uses groceries to lure you into purchasing other, higher-priced, presumably higher-margin items. The layout of the Amazon Fresh Web site actively encourages customers to go browse beyond groceries ("Over 500,000 Amazon Items") from media to small appliances to home improvement to pet supplies, patio, lawn and garden, automotive and more. But, more importantly, Amazon Fresh provides another way to lock Amazon users into the Prime program. As it stands, an annual payment of $79 gets Prime members free two-day shipping and access to Amazon Instant Video. After a 90-day trial, you can hold onto an upgraded version -- Prime Fresh -- for $299 a year, which includes free delivery Fresh delivery on all orders over $35. Refer back to the comparison I made last week between Amazon and Netflix (NFLX). Netflix can employ a blow the short-term to the wind strategy like Amazon does all it wants, but, because Netflix operates from a position of weakness, it cannot possibly succeed. At Amazon, however, Bezos can make seemingly irrational financial decisions today as a perfectly legitimate means to reach attainable ends -- those ends being Amazon seizing control of the massive long-term opportunity it not only has, but created for itself by implementing pretty much the same strategy it uses today for significant chunks of the last 13 to 14 years. Think about how illogical it is for anybody, particularly investors, to question anything Bezos does at AMZN. You can second-guess Reed Hastings at Netflix or Tim Cook at Apple (AAPL) because neither, albeit within different contexts, have a track record that warrants unconditional confidence. Bezos does. And the fact that he has answered questions about sacrificing the short-term in the interest of the long term the same way for more than a decade proves this. All the guy cares about is providing incredible customer service without the bottom-feeding and cheesy sales gimmicks Walmart (WMT) popularized. Shallow gestures of low prices have run their course; you have to accompany these promises with quality. That's what Bezos does throughout the entire Amazon web -- from a Prime membership to Subscribe & Save to Fresh. He makes Amazon a daily habit by evolving traditional retail techniques into the digital age. Just like Starbucks (SBUX). In fact, both Apple and Netflix could learn quite a bit from Amazon's technological prowess and subsequent success. Bezos could teach Netflix a thing or two about how to properly expand. And he could school Cook on how to maintain what once looked like unstoppable momentum. Follow @rocco_thestreet -- Written by Rocco Pendola in Santa Monica, Calif.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV