Reportedly, Amazon.com (AMZN) is planning to launch an online grocery shop called “Pantry,” mainly aimed at Amazon Prime members. The Pantry service would offer items such as cleaning supplies, kitchen paper rolls, canned goods like pet food, dry grocery items like cereal and some beverages.
Some of the goods are expected to meet with challenges related to shipping but Amazon seems to have come up with something to overcome this shortcoming. Pantry will carry around 2,000 grocery items to start with. All of these items will be sold at low cost to end users.
Amazon already runs a service “Subscribe and Save,” which provides some discounts to shoppers. Customers are provided additional discounts when they purchase more than five items in the same month.
Of late, Amazon has been on an expansion spree, expanding its warehousing network in all lines. It recently launched Amazon Fresh same-day grocery service in San Francisco. The company is also investing in drones to automate the delivery process.
Grocery is one of the most difficult sectors to crack, especially when it comes to online shopping as is evident from the now defunct business of Webvan. These endeavors often meet with failure as the operational cost (cost incurred in maintaining infrastructural facilities for delivery on time, warehousing facilities for storage of goods, etc) is exorbitant while margins are low. Since grocery items are mostly perishable in nature, it further increases the chances of wastage.
Amazon is one of the leading players in an extremely fast-growing market. In the last reported quarter, Amazon’s revenues of $17.09 billion were up sequentially as well as from the year-ago quarter. Management attributed the revenue increase to the growing consumption of digital content across different categories owing to the advantageous value proposition Amazon provides to its customers.
Currently, Amazon has a Zacks Rank #3 (Hold). Better-ranked stocks in the technology sector include Netflix Inc (NFLX), which carries a Zacks Rank #1 (Strong Buy), and Facebook Inc. (FB) and Microchip Technology Inc (MCHP), both with a Zacks Rank #2 (Buy).
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