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Amazon delivers cheapest groceries in NYC

April 16, 2015 04:30 PM
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(Bloomberg)—Amazon.com Inc., which has been seeking to push further into shoppers’ everyday lives, was the least expensive grocery-delivery option in New York City, beating the closest competitor by $20 on a 30-item order, a study found.

The report, from analysts at Nomura Securities International Inc., shows how supermarkets could be the next target of the Seattle-based Web retailer, through the combination of convenient delivery at low prices that it has used to snag business from book stores and big-box chains.

In the pricing study, Nomura ordered 30 grocery items—including green seedless grapes, Eggo whole-wheat waffles and a 2-liter bottle of Coca-Cola—from competing New York delivery services AmazonFresh, Instacart Inc., Peapod Inc. and Fresh Direct Holdings Inc. The order cost $122.03 from AmazonFresh, which included a $5 tip. Instacart, with the order placed through partnering grocer Fairway, came in $20 higher at $142.86. Fresh Direct was the most expensive, at $158.74.

“We believe that price, convenience, selection, and service will dictate who wins, but believe Amazon is currently very well positioned,” Robert Drbul, an analyst at Nomura, wrote in the report.

Amazon, No. 1 in the Internet Retailer 2015 Top 500 Guide, has been investing billions in new warehouses and fulfillment services as it seeks to persuade shoppers to use its website to order household items instead of making trips to the supermarket. Last month, the company unveiled the Amazon Dash Button, which lets customers order products like laundry detergent and baby food by pushing a button that can be mounted to a washing machine or kitchen cupboard. The device uses home Wi-Fi networks to alert Amazon to deliver the item.

 

Growing industry

Online groceries are a $10.9 billion industry in the U.S., and the market is expected to grow 9.6% annually through 2019, according to a December report by IbisWorld.

Peapod is the online-grocery leader, with 5.8% of the market, followed by Fresh Direct at 4.8% and Amazon, which also offers grocery delivery in Seattle, Philadelphia and parts of California, at 4.7%, according to IbisWorld. Other rivals include Wal-Mart Stores Inc. and Safeway Inc.

Peapod offers a wide range of grocery products at prices competitive with local grocers without charging a membership fee, said Peg Merzbacher, a spokeswoman for the company.

Amazon’s grocery-delivery service is available to its Prime members, who pay $99 a year for delivery discounts, in Seattle, Philadelphia, New York and parts of California.

Representatives for Amazon, Fresh Direct and Instacart declined to comment on the Nomura report.

 

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