AMZN) to conduct the bulk of our weekly grocery shopping.
As I explained earlier this month, after a lengthy trial in the Seattle area Amazon has made "Fresh" grocery service available throughout large swaths of the Los Angeles area. That includes my zip code -- and others -- in Santa Monica. "Fresh" works as part of your "Prime" membership. After a free three-month trial, you agree to pay $299 a year for Prime -- as opposed to the current rate of $79 -- and you receive free delivery on all Amazon Fresh orders greater than $35. As I expected, Amazon Fresh delivers the same quality experience we have come to expect from the traditional Amazon ordering process. Efficient. Speedy. Well-executed. And it absolutely competes on price. I probably don't look at price tags as much as I should, but it appeared to me that everything we ordered was priced the same as, or less than, what we pay at Safeway. And almost always less -- no surprise -- than what we pay at Whole Foods. I don't routinely buy groceries at Target ( TGT) and never go to Walmart ( WMT), but I presume Amazon is in their ballpark. My wife commented that what we got a lot more for the $55 or so we paid Amazon than she did on a quick weekend trip to Safeway where she dropped $47. Plus, you also get a bunch of free bottled water, which leads to my only gripe with Amazon Fresh. I chose "Doorstep Delivery," which means the driver leaves your order at your door. To ensure everything arrives and stays fresh, Amazon loads collapsable styrofoam containers with frozen bottles of water (safe to drink) and, in one instance, a bit of dry ice. That makes for a lengthy unloading process. Plus, I have to store two of the bags (pictured above), bulked up with the styrofoam, in my small apartment until the next delivery. I assume -- and hope -- if I opt for "Attended Delivery," meaning the driver knocks on my door and I must be present to accept the order, there will be less packing material. Seems to me milk, produce and the like can survive just fine in insulated bags using this method. But I don't know how long the distribution process takes, so we'll see.
But, this much is certain, I can see myself using Fresh on a regular basis. Probably weekly. I won't stop going to Safeway (it's convenient), Whole Foods or Trader Joe's (they both have items Amazon doesn't and provide fairly good brick-and-mortar experiences), but each store will receive less money from me. This process is not at all dissimilar to what has happened between Amazon and bookstores, electronics retailers and much of the rest of physical retail.
And Amazon is smart. Jeff Bezos obviously learned from Webvan's experience. While Webvan probably would have died anyway (it didn't have the scale or ability to subsidize the grocery business like Amazon does), it tried to expand way too fast for its own good (not all that different from Netflix ( NFLX)). So Amazon will continue its move into groceries slowly. It will develop best practices to get customers to include something other than groceries -- or high-margin grocery items -- with their Fresh orders. And, over time as the program expands, Amazon might just eat away at the revenue of traditional grocers and the superstores, stealing just enough business from each to make it one of the, if not the, dominant player in the space. -- Written by Rocco Pendola in Santa Monica, Calif.