Grocery Executives Worry Amazon Will Sacrifice Profits to Deprive Them of Sales
October 10 2017 - 1:19PM
Dow Jones News
By Heather Haddon
Grocery delivery companies are worried Amazon.com Inc. will
sacrifice profits to deprive them of sales.
"They are one of our first competitors who doesn't really care
about making money," Thomas Parkinson, co-founder of Peapod, a
pioneering grocery delivery service owned by Ahold Delhaize NV,
said on Tuesday at the WSJ Global Food Forum in New York. "So
that's a challenge for us."
Amazon upended book selling and other retail sectors by
concentrating on market share over margins. Grocery executives
expect the e-commerce giant's purchase this summer of Whole Foods
to presage a similar rush into their business. Amazon sold about
$1.6 million in Whole Foods store-branded beans, cereal and other
products online in the month after taking over the chain.
Pradeep Elankumaran, co-founder and chief executive of
Farmstead, a San Francisco-area delivery startup, said he aims to
make his startup profitable relatively soon. "We do have to make
money," the former Lyft Inc. executive said in an interview on the
sidelines of the conference.
Mr. Elankumaran said Farmstead has several thousand active users
and received $3 million in venture funding since its launch. He
said the company is using predictive algorithms to sell a more
limited selection of products than the tens of thousands sold at
traditional grocery stores, reducing warehousing costs.
"No one has ever done a good job in grocery delivery," said Mr.
Elankumaran. "It's so outdated."
Dick Boer, chief executive of the Ahold Delhaize chain that
operates grocery stores across the U.S. and Europe and bought
Peapod in 2001, said he believes high transport costs outside
densely populated urban areas will cap delivery in the U.S.
"Your country is so big," said Mr. Boer said. "There will be a
kind of a limit on how far you can go with online delivery
models."
Mr. Parkinson, who took orders by fax when he founded Peapod in
1989, said he is adding meal kits to his product offerings to keep
ahead of the competition. He said Peapod is working with food
makers to develop meal kits that are cheaper and contain less
packaging than those sold by competitors such as Blue Apron
Holdings Inc.
He said such meals will cost about $5 at Peapod, compared with
some $10 at other subscription meal kit services. And, he said,
they will still generate a profit.
"That's the big focus of Peapod since we started, to actually
make money, " he said.
Write to Heather Haddon at heather.haddon@wsj.com
(END) Dow Jones Newswires
October 10, 2017 13:04 ET (17:04 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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