Most previous attempts by others are now defunct or way below expectations. Why will Amazon be different? Selling groceries over the net is the nuttiest idea ever, in my humble opinion. Even if it works, the profits (if any) will be slim.
Groceries have been test marketed so the results must have been promising to roll out the program.
In case you haven't noticed Amazon is not price competitive on most grocery items so there is some margin there. My guess is that Amazon is targeting two groups. The first is young urban professionals whose time is valuable. They're willing to pay more for groceries for the convenience. The second group is restaurants. When I was in Seattle last year I saw a large Ammie truck down by the piers delivering to restaurants. There's margin in wholesaling better quality food. I suspect Amazon has found a way to reduce delivery costs by using their own trucks and vans.
Am I confident the Amazon grocery program is going to be successful? Of course not. Bezos uses his company as a giant test tube. Some experiments work while others don't. I do think this program has a better than 50-50 chance of making it.
Why do you think it's "the nuttiest idea ever"?
Amazon has no other places to grow its revenue, try to keep its stock at bubble high. It has to find a way to grow its revenue even though it's a bad idea, and very bad idea. Considering who would buy milk, breads, vegetable, fruits and meat online without physical seeing it. When they are delivered to your door. They are already on the track for several hours possible.
Amazon has many ways to grow their revenue. They've concentrated on tech and entertainment products while ignoring others. Yes they have products for the home but they're poorly presented and merchandised. The list of under-served product categories goes on and on.
When it comes to profitability Amazon doesn't have a clue. I don't think they know the meaning of inventory CONTROL and return on investment.
Amazon is a great company that will continue to be the market leader for decades. But as long as Ammie is Bezos's play toy they will continue to under-perform their potential.
Internet groceries is a good idea because NFLX isn't doing it and it was a great diversion from the facts, AMZN doesn't earn nothing doing anything but it does move cash on everything. Sort of like Seinfeld.