A woman works at a distribution station at the 855,000-square-foot Amazon fulfillment center in New York City.

A woman works at a distribution station at the 855,000-square-foot Amazon fulfillment center in New York City.

Last week, Amazon announced that it was stepping back from its plans to build a new headquarters in Long Island City, New York.

The move was stunning, as the search to find a new headquarters — known as HQ2 — for Amazon had cities across the country offering tremendous amounts of incentives to woo the business to their areas.

We seem to use Amazon for everything — from ordering toilet paper to asking Alexa for the weather.

But there’s one area that Amazon hasn’t seemed to crack just yet: delivering groceries. Yet is the optimal word. Amazon bought Whole Foods in 2017 and has been rolling out grocery options in more markets. The American food retail business is worth $860 billion, so Amazon definitely wants in.

Why?

From a recent article in The Atlantic:

Compared to groceries, clothes and electronics and dog food are incredibly simple to deliver. A company like Amazon keeps those products stored in a warehouse, packs them in a box, and sends them on their way through the mail or through its delivery contractors.

Groceries, though, can’t just be packed in a box and entrusted to mail carriers. Imagine fulfilling an order that includes popsicles, avocados, a case of Coke, and tortilla chips. The popsicles have to be kept cold, the avocados have to be chosen carefully, the Coke is heavy, and the tortilla chips can’t be crushed. Now consider that the average Peapod order has 52 items.

Because of these factors, it will always be cheaper for grocery stores to have customers come to them, and do all the work of shopping themselves, than it will be for the stores to bring the groceries to the customers, said Kodali, the Forrester analyst. “In the best case, you only make the same as what you would make in stores,” Kodali said. “It’s not like it’s a more profitable distribution channel.” One of Amazon’s big innovations in delivering packages was that it could cut out the middleman (the store) and sell things directly to consumers, saving the cost of overhead. But consumer packaged-goods companies can’t cut out the stores, since they don’t have the infrastructure in place to get their products, whether it be ice cream or avocados, directly to consumers.

We’re talking about the ubiquity of the delivery service — and what it means for your local grocery store, and your diet.

Produced by Denise Couture.

Guests

  • Joshua McNichols Reporter, KUOW; co-host of Primed, a podcast about Amazon and its influence; @joshuamcnichols
  • Akshay Rao Professor of marketing and General Mills chair in marketing, Carlson School of Management at the University of Minnesota
  • Kelly Alexander Long-time food reporter; food writing teacher at Duke University's Center for Documentary Studies and Department of Cultural Anthropology; @howamericaeats

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