During the dot-com bubble, e-grocers emerged as a threat to supermarkets' livelihoods. Webvan, Kozmo, Peapod, and other money-losing bottom-feeders leaned on the Internet and venture capitalist infusions to launch state-of-the-art grocery-delivery services.
However, the corner grocer emerged victorious. Webvan died a glorious death. Kozmo's rise and fall became a documentary. Peapod survived, but the notion of a killer national brand in home delivery rotted quicker than a sliced banana.
Well, maybe it's time for the supermarket chains to begin worrying again.
Amazon.com (Nasdaq: AMZN) is expanding its AmazonFresh delivery service, which it began testing in select Seattle neighborhoods two years ago. It's now rolling out the offering through most of metropolitan Seattle, spanning 49 different ZIP codes.
This isn't the online grocery category Amazon launched in 2006. There, it stocks 10,000 nonperishable items, which it ships out throughout the country as it would a Muse CD or a Dan Brown book.
Instead, AmazonFresh shoppers fill out virtual shopping lists for fresh groceries, then schedule doorstep deliveries from a fleet of refrigerated trucks. Shoppers can even elect to have "pre-dawn" shipments, with their unattended orders waiting for them by 6 a.m. Amazon charges a $5 delivery fee for orders smaller than $75.
Grocery stores don't have to break a sweat just yet. This isn't the same kind of threat that Wal-Mart (NYSE: WMT) and Target (NYSE: TGT) posed when their discount department stores quickly reformatted many of their superstores to begin stocking perishable food items. If it took AmazonFresh a little more than two years to go from serving a few tony Seattle neighborhoods to covering most of its home city, this process will take several years -- if not a decade -- to roll out nationally.
Supermarkets don't have a whole lot of wiggle room. Kroger (NYSE: KR), Safeway (NYSE: SWY), and Whole Foods Market (Nasdaq: WFMI) sport trailing net profit margins between 1.4% and 2.2%. Grocery stores make up those slender margins in volume. If AmazonFresh expands, or inspires upstarts that have learned from Webvan's mistakes, that could be a problem for traditional grocers.
Amazon really does want to take over the world -- one temperature-controlled tote at a time.
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