Will New Yorkers Soon Get Their Groceries From Amazon?
Earlier this year, Amazon made a big splash when it announced it was getting into the grocery business. After a trial period, the company decided that it would roll out a direct-to-door AmazonFresh service in Seattle that could bundle grocery deliveries with other Amazon purchases.
Never one to rest on its laurels, it seems the company could be making moves to immediately enter the largest market in the United States: New York City.
Source: Visitor7, via Wikimedia Commons.
Uncovering a plan
Though it was thought that the company would initially be focusing on the West Coast, Robert Peck, an analyst for SunTrust Robinson Humphrey, believes the writing is on the wall for Amazon's entry into New York.
According to Peck, an Amazon partner has purchased approximately 1 million square feet of space in New Jersey that was previously occupied by a wholesale grocery business. Apparently, the Amazon partner has raised a significant amount of capital that Peck believes will be used to finance renovations on the facility.
The location of the potential grocery center is ideal, as it is within striking distance of all five NYC boroughs, the northern half of New Jersey, and Westchester County.
How this could change the grocery landscape
It's difficult to tell whether or not other grocers -- or investors in those grocers -- should be worried. AmazonFresh is a brand-new service that may have a tough time gaining traction. But let's not be naive: Amazon has a long history of disrupting previously entrenched industires.
A recent survey by The Hartmann Group showed that almost half of shoppers were open to the idea of buying groceries online. Two of the top five reasons given were "saves time" and "no crowds." This, no doubt, would be an even bigger motivation to residents of the most densely populated area in the country.
The concept of same- or next-day delivery isn't new to these city dwellers. Already, FreshDirect, which has been around since 2002, offers delivery of food to homes in the greater New York area. The company has a reputation for being able to deliver organic, locally grown, and kosher items. The entry of Amazon -- and the company's ability to undercut FreshDirect on prices -- may represent a serious threat.
Another company likely to feel the heat of competition is Wal-Mart . Though groceries aren't the company's sole line of offerings, it has at least 20 locations in the greater New York area. And with Amazon already offering many of the same non-grocery products as Wal-Mart, residents may start to wonder if making the trip to the store is even worth it.
What will be more interesting to see is how specialty grocers perform against AmazonFresh. Whole Foods has seven locations in New York City proper and 19 in between White Plains and Trenton. Fairway , on the other hand, is a newly IPO'd grocer that currently only has operations in the greater NYC area. Fairway, much like Whole Foods, differentiates itself from standard grocery stores by focusing intensely on the in-store experience, while offering a wide variety of fresh, organic, and locally sourced food.
On one hand, FreshDirect has been around for more than a decade -- offering the same types of foods for delivery at home -- and that hasn't stopped either of these grocers from growing their businesses. On the other, Amazon is a much bigger name, and the convenience of at-home delivery from such a reliable name could put a dent in Whole Foods' or Fairway's revenue.
In the end, this is a story worth watching. As things play out in New York, investors will be rewarded for paying attention to trends that form and could likely be carried out across other major markets in North America.
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The article Will New Yorkers Soon Get Their Groceries From Amazon? originally appeared on Fool.com.Fool contributor Brian Stoffel owns shares of Amazon.com and Whole Foods Market. The Motley Fool recommends and owns shares of Amazon.com and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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