Amazon is working towards launching Amazon Fresh, its grocery delivery service, in the New York City area for 2014, says analyst Robert Peck of SunTrust Robinson Humphrey.
“Our belief stems from a planned and financed expansion into renovated warehouse facilities in NJ,” says Peck in a new note this morning. “The previous tenant of the facility was C&S Wholesale Grocers. The facility will be less than 50 miles from all five NYC boroughs, southern Westchester, and most all of central NJ.”
He continues, saying, “We believe, based on our research, that a developer partner of Amazon has purchased ~1m square feet of warehouse space in a prime NJ location and raised capital to renovate and improved the facilities. Amazon is the planned tenant for the larger ~526k sq ft. facility, while the remaining ~ 401 k sq ft. complex, which houses refrigeration capabilities, remains vacant. It is our opinion that Amazon will be the tenant for the second building as well following the large capital raise by its partner to refurbish this unit capable of storing perishable goods (previous tenant was C&S Wholesale Grocers), and serve as its center for Fresh in the NY metro area.”
Amazon has been testing its grocery delivery service in Seattle for the past five years, one of the longest product trials in its history, notes Peck. Amazon has said it would roll out Fresh further when the economics are proven, and Peck thinks Amazon has figured out the economics of grocery delivery.
He believes that in the long run, it will deliver profits for Amazon, and increase purchases of other stuff Amazon sells.