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Amazon wants to deliver groceries to your car in 15 minutes

The e-commerce giant is developing several new store concepts, including grocery pickup locations in Seattle called AmazonFresh Pickup.

AmazonFresh Pickup has arrived.

Amazon on Tuesday showed off a quick video and landing page for its newest store concept: grocery pickup locations. The stores are still in beta, with only Amazon employees able to use them. The company didn't say when the two stores in Seattle will open to the public, but the locations will only be available for Prime members.

Customers will be able to order online or on mobile from thousands of items, including produce, meats, dairy and everyday essentials. Amazon workers will select and bag orders for them, then bring them to customers' cars at reserved times. The company said orders can be picked up in as little as 15 minutes after an order is placed.

The stores in Seattle's SODO and Ballard neighborhoods, which were expected for months during construction and permitting, are free to use, with no minimum orders. In comparison, AmazonFresh, the company's long-standing grocery delivery service, costs $15 per month to join and includes a $10 charge for orders under $40.

The new stores are part of Amazon's effort to grow its physical retail presence, with the company opening bookstores, campus pickup locations and mall popups. Amazon in December also showed off a short video for Amazon Go, a convenience store without cashiers that's also in beta.

AmazonFresh Pickup is the company's way of getting a foothold in "click and collect" groceries so it can expand in the $800 billion US grocery market, where it's been slow to grow. However, Amazon's two beta stores aren't yet a major challenge to grocery giants Walmart and Kroger, which already provide "click and collect" groceries to customers without their needing to join a membership program.

Your new grocery?

Amazon

Despite those small beginnings, these locations have inspired heated speculation over Amazon's potential ambitions to expand into physical retail. Some publications last year reported Amazon is already considering opening 2,000 grocery locations, four times the number of Trader Joe's markets. Amazon, which is typically secretive about its plans, said those reports were "not even close."

Some retail experts have also questioned why Amazon would want to build up in physical retail at the same time many stores are shuttering and mall traffic is shrinking.

Current curbside pickup options have problems, including subpar produce and long wait times for pickup, said Scot Wingo, executive chairman of e-commerce consultant ChannelAdvisor. Considering those issues, Amazon has an opportunity to gain an edge in "click and collect" by using its strengths in selection, price and convenience to create a better and faster service, experts said.

"They're trying to create the best customer experience possible, then figure out the cost after," Wingo said.

He said Amazon is able to expand a program quickly when it hits, such as its Prime Now speedy delivery service, but added that it's clear Amazon is still experimenting on what works and doesn't in grocery.

"I think it's going to take years before we see these efforts go nationwide, but Amazon is extremely persistent when it comes to disrupting groceries," said Cooper Smith, head of Amazon research at L2, an e-commerce research and advisory firm.

The AmazonFresh grocery delivery service is still a small part of the company's business despite launching 10 years ago. Groceries could help Amazon build up its revenue and boost customer loyalty, since that market accounts for such a large chunk of consumers' wallets and people tend to purchase groceries several times a month.

Still, grocery delivery hasn't appeared to be a particularly successful business for Amazon, since selling supermarket food is already a very low-margin business. Adding shipping costs makes it even less profitable. Instacart, Peapod and FreshDirect also offer grocery deliveries.

Creating pickup locations could help make AmazonFresh a more profitable enterprise, but the company will still have an uphill battle if it hopes to keep expanding in a market already jammed with competitors.

Originally published at 7:19 a.m. PT.
Updated 9:20 a.m. PT: Adds ChannelAdvisor and L2 commentary.

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