Earlier this year, Amazon.com, Inc. (NASDAQ:AMZN) 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.com, Inc. (NASDAQ:AMZN) 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.com, Inc. (NASDAQ:AMZN)’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.com, Inc. (NASDAQ:AMZN) 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.com, Inc. (NASDAQ:AMZN) 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.com, Inc. (NASDAQ:AMZN) — 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 Stores, Inc. (NYSE:WMT). 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 Stores, Inc. (NYSE:WMT), residents may start to wonder if making the trip to the store is even worth it.
