Amazon.com (AMZN - Analyst Report) recently launched a hardware product named Amazon Dash.
The six-inch device is integrated with a microphone, speaker and a bar-code reader. It also has a Bluetooth-enabled remote control. Amazon Dash can scan product barcodes through the bar-code reader and log orders on the AmazonFresh grocery delivery account. Additionally, a user can use the microphone to easily order groceries and other household goods from home. The device will use a Wi-Fi connection to send the information over the Internet to the grocery store.
However, only AmazonFresh users who are invited by the company can sign up for the product now. Reportedly, the device is not chargeable during the trial period.
AmazonFresh was introduced in 2007 on a small scale near Amazon’s headquarters in Seattle and later expanded it to Los Angeles and San Francisco. The service enables users to order groceries online which are delivered either on the same or the next day, thus saving time and effort.
Though Amazon is not very optimistic about generating high margins from the grocery-delivery service, it expects this expansion to widen its operational activities (shopping) to different categories from electronics to clothes and household essentials.
With a view to make AmazonFresh a success, Amazon has already started investing in warehouses.
Amazon’s expansion plan is likely to pose a threat to other existing grocery chains like Kroger Co. (KR - Analyst Report), Safeway Inc. (SWY - Analyst Report) and Whole Foods Market. (WFM - Analyst Report), as well as other retailers such as Wal-Mart Stores Inc. and Target Corp.
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 fail as the operational costs (cost incurred in maintaining infrastructural facilities for delivery on time and warehousing facilities for storage of goods) are exorbitant while margins are low.
Also, since the grocery items are mostly perishable in nature, it further increases the chances of wastage. Additionally, it is not possible to forecast demand in this sector.
Last week, the company released an Android-based Internet video-streaming set-top box named Fire TV. Amazon’s Fire TV, powered by Google's Android software and HTML 5, is claimed to be three times as powerful as Apple Inc.’s TV.
We believe these new product offerings will help Amazon to improve sales and attract new users.
Currently, Amazon has a Zacks Rank #3 (Hold).