Amazon Launches Online Grocery Pickup Service

In a move that sets it up to compete with rival Wal-Mart Stores, Inc. (WMT), e-commerce behemoth Amazon.com, Inc. (AMZN) has expanded its online grocery pickup services across the Seattle region. The service was previously being tested with a select group of customers in the city. „AmazonFresh Pickup,“ as the service is called, enables Amazon Prime members to order groceries online and pick them up at physical locations.

The Seattle-based company intends to use license plate recognition technology to identify repeat customers. People who use the company’s Amazon Prime Fresh service will receive expedited service, enabling them to pick up orders in as little as 15 minutes. Amazon Prime members can use a two-hour window to place their orders. Currently, Amazon has two locations in Seattle for customers to pick up their groceries. (See also: Amazon May Have Just Killed the Grocery Store.)

In its design and scope, AmazonFresh Pickup is similar to the business of Wal-Mart, which introduced a similar service in 2015 and expanded it to eight new markets last year. The service has garnered mostly positive reviews from Wal-Mart’s customers. During the Arkansas company’s fourth quarter 2016 results earlier this year, Brett Biggs, chief financial officer, said that the service had grown 27 percent over the past year. (See also: Merrill Lynch Sees 24% Upside in Wal-Mart.)

However, Amazon will have to expend significant capital in order to catch up with Wal-Mart in this area. This is because Wal-Mart already has a ready network of physical stores where customers can pick up their groceries. In its release announcing the initiative, the company stated that 70 percent of Americans lived near a Wal-Mart location. In contrast, Amazon’s presence is mainly online. As such, it will have to build new physical locations to expand the service to new markets.

Given its recent moves, the company may already be doing that. The Seattle pickup locations for AmazonFresh Pickup are dedicated locations. The company could also use Amazon Go, a store without checkout registers that it announced last year, as pickup spots. The stores will also have a second floor staffed by robots, which will be responsible for picking out items for online orders. This suggests that the stores may also act as potential warehouses for pickup. According to the latest news, the Seattle-based company is said to be planning similar stores in Europe. Finally, certain reports have suggested that the company is planning to open 2,000 grocery stores, but Amazon has denied the claim. (See also: Why Amazon Mulled and Decided Against Buying Whole Foods.)

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