) is planning to launch an online grocery shop called "Pantry,"
mainly aimed at Amazon Prime members. The Pantry service would
offer items such as cleaning supplies, kitchen paper rolls,
canned goods like pet food, dry grocery items like cereal and
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Some of the goods are expected to meet with challenges related to
shipping but Amazon seems to have come up with something to
overcome this shortcoming. Pantry will carry around 2,000 grocery
items to start with. All of these items will be sold at low cost
to end users.
Amazon already runs a service "Subscribe and Save," which
provides some discounts to shoppers. Customers are provided
additional discounts when they purchase more than five items in
the same month.
Of late, Amazon has been on an expansion spree, expanding its
warehousing network in all lines. It recently launched Amazon
Fresh same-day grocery service in San Francisco. The company is
also investing in drones to automate the delivery process.
Grocery is one of the most difficult sectors to crack, especially
when it comes to online shopping as is evident from the now
defunct business of Webvan. These endeavors often meet with
failure as the operational cost (cost incurred in maintaining
infrastructural facilities for delivery on time, warehousing
facilities for storage of goods, etc) is exorbitant while margins
are low. Since grocery items are mostly perishable in nature, it
further increases the chances of wastage.
Amazon is one of the leading players in an extremely fast-growing
market. In the last reported quarter, Amazon's revenues of $17.09
billion were up sequentially as well as from the year-ago
quarter. Management attributed the revenue increase to the
growing consumption of digital content across different
categories owing to the advantageous value proposition Amazon
provides to its customers.
Currently, Amazon has a Zacks Rank #3 (Hold). Better-ranked
stocks in the technology sector include
), which carries a Zacks Rank #1 (Strong Buy), and
Microchip Technology Inc
), both with a Zacks Rank #2 (Buy).