Amazon’s Time-Saving Trick for Groceries: You Drive to Us – Geoffrey A. Manne and Jennifer MacLean 03.28.17 4:58 PM

Amazon is diving deeper into the instant-gratification business, but with a twist: Now you come to them. The company this morning unveiled AmazonFresh Pickup: order groceries online, then drive to an Amazon-run store, where a worker brings them all bagged up to your car.

The first two grocery pickup spots are in Seattle and available only to Amazon employees. When the company finally opens the service to the public, grocery pickup will become yet another Amazon Prime perk. But groceries are more than just another add-on for Amazon. Analysts predict online shopping could amount to 20 percent of all grocery spending within the next decade. This isn’t Amazon’s first attempt at groceries, or a physical store. But in combining the two, the company has hit on a competitive strategy that just might work.

As far back as August 2007, Amazon was testing its first iteration of Fresh, delivering groceries from its vast network of fulfillment centers. But the rollout of that service proved complicated. Amazon started out charging Prime customers $299 per year for the service before settling on $14.99 per month. The biggest challenge for Amazon: Groceries aren’t like any other consumer good.

“It’s notoriously difficult to stay profitable by delivering groceries,” says Jason Goldberg, vice president of commerce at the digital marketing company Razorfish. “Perishables must arrive when a consumer is home to receive them and put them in a refrigerator.”

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