Reports: Amazon may expand grocery service to New York

SEATTLE – Amazon's grocery service might be making its way to New York next year, according to published reports.

Citing analysis from SunTrust analyst Robert Peck, EcommerceBytes.com reported that the Seattle-based online retailer may start offering Amazon Fresh in New York in 2014, based on his finding that the company had expanded into a New Jersey warehouse previously used by C&S Wholesale Grocers. 

Amazon has been testing the service in Seattle for six years and recently rolled it out in Los Angeles. In June, The Seattle Times reported that Amazon would give members of its premium AmazonPrime service a 90-day trial of Prime Fresh, which includes the grocery-delivery service. After 90 days of paying the usual $79 annual fee, members would be offered the chance to upgrade to Prime Fresh for $299 per year.

Even if Peck's analysis is correct, Amazon could find New York a somewhat more difficult place to gain a foothold than Seattle or Los Angeles. FreshDirect and Ahold USA's Peapod largely dominate the online grocery market there. According to Bloomberg, when Peapod entered the New York market in 2011, it was already the largest online grocer in the country, while FreshDirect, which has been around for a decade, estimated it had about 80% of the market.

Location is another issue. As EcommerceBytes.com noted, the warehouse Amazon is buying is less than 50 miles away from New York and surrounding areas. By contrast, FreshDirect's distribution centers are located within the city, and it's building a greenhouse to grow its own produce in the Bronx. Meanwhile, Peapod benefits from the strong presence throughout the city of the Stop & Shop supermarket chain, also owned by Ahold USA.

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