Costco has launched a new online grocery shopping service, which will offer two-day delivery nationwide. There’s only a small delivery fee, but that’s a little misleading because the list prices for the items ordered in this way will be 15-17% higher than prices customers would encounter in stores. The irony here is that Costco’s stores are in some ways very much like warehouses, and therefore offer many of the same cost benefits as actual warehouses, meaning that e-commerce doesn’t provide many savings in that department, while shipping for the bulk items Costco typically sells would be disproportionately expensive. It would certainly be more transparent for Costco to be explicit about shipping while keeping the prices the same, but it’s likely banking on consumers making the same assumptions they make in its stores, namely that buying in bulk is always cheaper, without actually checking prices. That’s a tougher sell online, though, where comparison shopping is only a browser tab away. In other words, all this feels like a box-checking exercise against Amazon rather than a serious attempt to actually sell many groceries this way, which makes you wonder whether it’s worthwhile at all. Meanwhile, Amazon’s massive logistics advantage just continues to grow.
A company that owns technology for producing ready to eat meals that don’t require refrigeration says it’s been talking to Amazon about it, and that Amazon is looking into providing the food as part of its groceries offering. Because the food produced using the technology can stay on an unrefrigerated shelf for up to a year, it’d be a great fit for the more standard UPS-based delivery Amazon uses for non perishable items and wouldn’t require the much greater density of delivery infrastructure Amazon’s fresh grocery service does, and could therefore be offered much more widely. It’s a bit surprising to hear an Amazon partner (or potential partner) talk this openly about its relationship given Amazon’s general secrecy, which may yet scupper the deal. And the technology is still awaiting FDA approval, so there’s nothing imminent anyway. But it’s yet another sign that Amazon is really serious about making a bigger push in groceries, and that that push isn’t going to be restricted to just the Whole Foods footprint it’s in the process of acquiring.
Amazon’s Meal Prep Service Has Already Quietly Launched (Jul 18, 2017)
It turns out that the Amazon meal prep service suggested by a recently filed trademark application has already launched quietly in some areas, including Seattle. Just as I suggested in my piece yesterday, it seems the service is being offered as a feature of the Amazon Fresh grocery shopping service, and is dubbed Amazon Meal Kits. Just as Amazon’s recently launched clothing box service Prime Wardrobe ditches the subscription element common with competing services, so the Meal Kits are one-off purchases rather than a subscription, which lowers the barriers to trying it out. The product is a box of ingredients with instructions on how to prepare a meal, and GeekWire managed to find a customer who’d used the service and enjoyed it. With the fairly low profile MealKits have for now, it’s not likely to have an immediate impact on competitors like BlueApron, but as it ramps up and starts to be promoted more heavily, it will start to gain significant share in this market where it’s available.
Amazon has announced two grocery pickup locations that are free for Prime members – Recode (Mar 28, 2017)
These stores have been in the works for a while, and launch has felt imminent as people have spotted signs going up and other indications that they would be opening soon. So I’d take with a pinch of salt the slightly cynical take here that this announcement was a response to the negative Amazon Go story from yesterday. However, it is worth noting that these stores are opening to employees only for now, apparently with no set timeframe for public launch, though the pricing model is already clear: Prime subscribers get to use the service and these locations at no additional cost, versus the additional monthly fee Prime subscribers have to pay for Fresh delivery at the moment. As I pointed out earlier, this is a much less groundbreaking model than the Go concept, one that’s already being offered both in other markets (this piece mentions the UK) but here in the US too, with big grocery chains including my local Smith’s store. But it’s still a useful additional feature for an online-only (for now) grocery retailer to offer, and part of Amazon’s broader experimentation with physical retail.
Documents reveal ‘AmazonFresh Pickup’ as the tech giant’s next physical retail concept – GeekWire (Mar 14, 2017)
The concept here isn’t new, either for Amazon or in general. With regard to Amazon, it was one of several physical retail concepts discussed in an article last year, and looks like it’s now coming to fruition. But the concept of ordering groceries online and picking them up outside a store isn’t new either – my local Smith’s grocery store (part of the Kroger company) does this today. The big difference will be that this AmazonFresh Pickup store won’t be a regular grocery store, but just that pickup experience. This would fill a gap in the current AmazonFresh service for those who won’t be home (or don’t know when they’ll be home) when groceries might be delivered, but can schedule a stop at a grocery store on their way home. I think we’re going to continue to see Amazon experimenting with lots of physical retail models until they get the right mix to complement their online presence.