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Amazon (AMZN) Ups Delivery Game With Expanding Pilot Project

Zacks Equity Research

Amazon AMZN is making its presence felt in the grocery segment of retail sector, thanks to its robust Prime delivery service and portfolio of quality products.

The company’s pilot project, which is based on purchase data of Prime shoppers at Whole Foods, has helped Amazon offer the same products with free two-hour delivery starting August. The program is now reportedly available in almost 30 cities.

This is likely to expand Amazon’s footprint in the $840-billion U.S. grocery market. Further, it will promote its Prime business, which in turn will drive its top line.

Strengthening Delivery System

Amazon is constantly stepping up its delivery initiatives. Apart from the latest project, the company’s Prime Free One Day service is gaining traction owing to its wide coverage of products.

Further, its two-hour delivery service of natural and organic products, such as meat and seafood, fresh produce and staples from Whole Foods Market, recently expanded to cities like Lexington, Little Rock, Charlottesville, Asheville, Columbia, Manchester, Savannah, Naples and Mobile. At present, the service delivers groceries in 90 U.S. metros.

Additionally, the AmazonFresh delivery service was recently launched in Indianapolis. The service enables Prime members to receive delivery of daily essential goods and grocery items, ranging from meats to fresh produce, within two hours. The service is also available in Houston, Minneapolis, Phoenix and Las Vegas.

Amazon.com, Inc. Revenue (TTM)

 

Amazon.com, Inc. Revenue (TTM)

Amazon.com, Inc. revenue-ttm | Amazon.com, Inc. Quote

 

Aggressive Retail Stance, Rising Competition

Prime’s quick delivery services and customer loyalty program are major positives for Amazon.

Moreover, the e-commerce giant’s deepening focus on the retail space is working in favor. The company is aggressively pursuing the launch of a chain of grocery stores across all major cities in the United States, including San Francisco, Seattle, Chicago, Washington DC and Philadelphia, with the first set-up in Los Angeles.

Further, Amazon is gathering steam to set up additional Whole Foods stores across U.S. cities and suburbs. Additionally, it intends to take the number of Amazon Go stores to a record of 3,000 by 2021.

All these endeavors are building competitive pressure on retailers like Walmart WMT, Target TGT and Kroger KR.

However, these companies are also strengthening their delivery services to counter threat from Amazon.

Walmart has started offering same-day delivery for certain home and tech products such as clothing irons, laptops, mobile phones and televisions in Mexico. Meanwhile, Target’s buyout of Shipt continues to strengthen its same-day delivery service.

Kroger is reportedly testing a service that delivers meals and groceries to customers within 30 minutes.

Hence, fast delivery competition is intensifying in the retail space.

Currently, Amazon carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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