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Friday, June 16, 2006 - Page updated at 12:00 AM

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Amazon appeals to shoppers' taste buds in newest venture

Amazon.com has begun selling groceries in the U.S. as it tries to lure shoppers after profit fell last year.

The online grocery, which started May 25, sells 15,000 nonperishable grocery items in bulk, including diapers, spokeswoman Tracy Ogden said.

The products, which also include rice and detergent, will be shipped for free if customers order at least $25 worth of goods, she said. About half the items are organic products.

Seattle-based Amazon, which began as a bookseller, has added jewelry, apparel and plants to its selection as part of Chief Executive Jeff Bezos' strategy to make it a one-stop shop to increase traffic and revenue and lure customers to buy other, more profitable products. The online retailer's earnings have fallen for five straight quarters as spending increased.

"These grocery items are a loss leader to get people to Amazon," said Tim Ghriskey, who helps manage more than $1 billion at Bedford Hills, N.Y.-based Solaris Asset Management. "It's part of their strategy to generate revenue, but there's still no evidence increased revenue means increased profit."

Amazon.com shares rose $1.28, or 3.8 percent, to $34.96 Thursday, but they are down nearly 26 percent so far this year.

Amazon's grocery business will compete against Royal Ahold's Peapod unit, the largest Internet grocer in the U.S., as well as privately held FreshDirect.

Several online grocers have failed in the past. Webvan Group filed for bankruptcy protection in 2001 and some grocery chains have scaled back their online operations.

In October 2003, Amazon.com launched a gourmet-food section by teaming up with such third-party merchants as Dean & DeLuca. With the launch of the online grocery, Amazon owns the inventory.

Information from The Associated Press is included in this report.

Copyright © 2006 The Seattle Times Company

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