Amazon ramps up US grocery offer as first quarter profits fall

Prime Pantry, which is only available to subscribers of its Prime delivery service, offers delivery of bulky items such as soft drinks, laundry products and crisps.  The service, which promises delivery within four days, comes with a flat $5.99 fee per Prime Pantry box, which can weigh up to 45lbs. It does not include fresh food.

Planet Retail global research director Natalie Berg said: “No move by Amazon is to be taken lightly; however, Prime Pantry is a long way from becoming the first port of call for online grocery shoppers. The biggest barriers, in our view, are the weight limitations and slow delivery.

“Forty-five pounds adds up very quickly: a Coke fridge pack, a bag of pet food and some laundry detergent would fill an entire box. Meanwhile, Prime members are unlikely to accept four day lead times, particularly when it comes to household essentials.”

However, Berg said she was “extremely confident” in Amazon’s ability to become a “credible grocery retailer”.

She said: “We are expecting the launch of a high-margin, quality-driven private label line to further support Amazon’s new venture, mirroring what has been done in other categories such as electronics. The continued roll-out of AmazonFresh combined with new technologies that make routine purchases easier will ultimately drive loyalty, further embedding the Amazon brand into shoppers’ everyday lives.”

Meanwhile, Amazon’s global sales jumped 23% to £19.74bn in its first quarter to March 31. However operating profit dropped 19% to $146m.

Amazon chief executive Jeff Bezos said: “We get our energy from inventing on behalf of customers, and 2014 is off to a kinetic start.”

The etailer expects to make a loss of between $55m and $455m next quarter, compared with a $79m profit in the second quarter of 2013.

In the UK over the quarter, Amazon launched its Prime Instant Video service, where Prime subscribers benefitted from unlimited TV and movie streaming as well as free one-day delivery.

Amazon also introduced its first stab at broadcasting original content on Prime Instant Video. It developed political satire Alpha House, which premiered in the UK in February and is producing comedy series Betas through Amazon Studios.

Other highlights throughout the quarter included the launch of Sunday delivery in a number of UK cities, and the debut of Amazon Student, a new initiative to help students save both money and time on shopping, with six months free one day delivery included.

Meanwhile, it also launched a home automation store on its UK site, which includes products to manage homes and lives remotely via smartphones or tablets, and a mens grooming store.