> They don't have the massive overhead of the stores weighing them down.
Is grocery store overhead avoidable for Amazon? Amazon's biggest wins have come in places where carrying costs are not just large but easily reducible.
Books are heavy, bulky, and have extremely high product variety, so physical stores are large and require heavy curation. They're also stable, nonfragile, and open for artificially discounted consumer shipping via media mail. Amazon started there and won heavily because a warehouse in Omaha can win on variety and price nationwide.
Clothes are bulky and high-variety too, with different sizes adding 3x to 10x multipliers on product count. Physical clothing stores generally involve large spaces (fitting rooms, backroom with stock), heavy employee presence (reshelving, customer service), and high loss (theft, damage). Online sales suffer from the inability to try things on, but clothes are stable, relatively nonfragile, and lightweight. Amazon parlayed cheap shipping into generous return policies and avoided all the other overhead.
Large appliances are a similar story; highly varied, hard to stock, hard for consumers to take home, easy to store and ship in quantity.
But groceries? They come with huge carrying costs, definitely, and making grocery stores presentable is quite demanding. But many of those costs are inherent. Frozen goods need to stay frozen; lots of produce is too unappealing to sell; bulk produce (e.g. broccoli) stays moist, needs to be investigated for decay before it spreads, and requires steady turnover; delicate produce (e.g. herbs, greens) can't be stacked or treated roughly and turns over incredibly fast. Further, much of it has to be sourced and distributed fairly locally - and god help you if you let mislabeled or fraudulent products into your supply chain.
None of that dooms order-for-delivery groceries, but it means the pickers for those products will be going on-demand to a relatively local destination which looks relatively like an existing grocery store. There are efficiencies to be had like not needing prime "on the drive home" real estate and discarding checkout lanes, but it's nowhere near the same efficiencies as warehoused national distribution like clothing.
What sounds more likely to me is an increasing split into three different classes of food sale. Stable bulk goods reward the centralized model with cheap carrying costs, whether that's CostCo or Amazon, and can be sold on price above convenience. Staple perishables (milk, lettuce, apples, etc.) get sold on demand with localized distribution where possible - we already see farmer's markets staying in business but including not-actually-local goods like bananas. And speciality goods get sold by dedicated retailers both in person and online; spices and hotsauce are already better bought online, while exotic perishables are best found at boutique stores that don't try to compete with chains on staples. There's plenty of room in all that for Amazon and delivery groceries, but no obvious market dominance like we saw in other fields.
Is grocery store overhead avoidable for Amazon? Amazon's biggest wins have come in places where carrying costs are not just large but easily reducible.
Books are heavy, bulky, and have extremely high product variety, so physical stores are large and require heavy curation. They're also stable, nonfragile, and open for artificially discounted consumer shipping via media mail. Amazon started there and won heavily because a warehouse in Omaha can win on variety and price nationwide.
Clothes are bulky and high-variety too, with different sizes adding 3x to 10x multipliers on product count. Physical clothing stores generally involve large spaces (fitting rooms, backroom with stock), heavy employee presence (reshelving, customer service), and high loss (theft, damage). Online sales suffer from the inability to try things on, but clothes are stable, relatively nonfragile, and lightweight. Amazon parlayed cheap shipping into generous return policies and avoided all the other overhead.
Large appliances are a similar story; highly varied, hard to stock, hard for consumers to take home, easy to store and ship in quantity.
But groceries? They come with huge carrying costs, definitely, and making grocery stores presentable is quite demanding. But many of those costs are inherent. Frozen goods need to stay frozen; lots of produce is too unappealing to sell; bulk produce (e.g. broccoli) stays moist, needs to be investigated for decay before it spreads, and requires steady turnover; delicate produce (e.g. herbs, greens) can't be stacked or treated roughly and turns over incredibly fast. Further, much of it has to be sourced and distributed fairly locally - and god help you if you let mislabeled or fraudulent products into your supply chain.
None of that dooms order-for-delivery groceries, but it means the pickers for those products will be going on-demand to a relatively local destination which looks relatively like an existing grocery store. There are efficiencies to be had like not needing prime "on the drive home" real estate and discarding checkout lanes, but it's nowhere near the same efficiencies as warehoused national distribution like clothing.
What sounds more likely to me is an increasing split into three different classes of food sale. Stable bulk goods reward the centralized model with cheap carrying costs, whether that's CostCo or Amazon, and can be sold on price above convenience. Staple perishables (milk, lettuce, apples, etc.) get sold on demand with localized distribution where possible - we already see farmer's markets staying in business but including not-actually-local goods like bananas. And speciality goods get sold by dedicated retailers both in person and online; spices and hotsauce are already better bought online, while exotic perishables are best found at boutique stores that don't try to compete with chains on staples. There's plenty of room in all that for Amazon and delivery groceries, but no obvious market dominance like we saw in other fields.