Amazon Expanding Its “AmazonFresh” Online Grocery Delivery Service

Amazon has been testing a new grocery delivery service over the last five years, and now, it’s ready to expand into more U.S. cities. 

Amazon’s grocery service, called AmazonFresh, started out in Seattle roughly five years ago. The service allows Seattle residents to order their groceries online, and Amazon delivers the food via its own delivery trucks. 

Apparently, Seattle served as a successful trial run for AmazonFresh, and Amazon plans to roll it out to other cities. In fact, AmazonFresh could make its way to Los Angeles as early as this week, and the San Francisco Bay Area could see the service later this year. 

If all goes well, Amazon plans to expand AmazonFresh even further to 20 other cities in 2014 (including some outside of the U.S.). It’s even looking to build freezers throughout warehouses to keep the food cold. 

Amazon is likely looking to enter a new market in order to keep growing. The grocery market could be a good plan, considering it made $568 billion in sales last year — and not many companies have perfected the online grocery business. 

For instance, online grocery business Webvan — which delivered products to customers’ homes within 30-minutes of the time they desired — went bankrupt in 2001. It was headquartered in Foster City, California and operated in the San Francisco Bay Area, Los Angeles, San Diego, Dallas, Orange County, Chicago, Seattle, Portland, Atlanta and Sacramento. 

Some worry that Amazon could run into trouble with the grocery business, considering the fact that food expires quickly and delivery can damage items. 

However, AmazonFresh has been through a five-year trial, which was likely a learning experience for the company. Also, Amazon will likely deliver higher-margin merchandise like electronics along with the low-margin food items, putting it in a better position than grocery items alone. 

AmazonFresh could hurt grocery chains like Kroger and Safeway, but it’s not the only company currently attempting food and merchandise delivery. Wal-Mart is currently testing same-day and next-day delivery of groceries as well. Other smaller online grocery companies like FreshDirect (based in New York) and Peapod (based in Illinois) are established in the business as well. Peapod even operates in many U.S. cities. 

As Amazon opens more warehouses with proper refrigeration, AmazonFresh could also offer same-day and next-day deliveries in many cities.