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AmazonFresh Services Coming to Milwaukee Area

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Amazon.com Inc’s (AMZN - Free Report) online grocery business, AmazonFresh is likely to get a boost as it is being expanded to a new area, Milwaukee, WI.

The service will now offer thousands of essentials to members in Milwaukee. The regions where this grocery service will be available include Milwaukee, Mequon, Menomonee Falls, Wauwatosa, Brookfield, Waukesha, West Allis, New Berlin, Greenfield, Oak Creek, Franklin, Muskego and Caledonia.

Coming to the price performance, shares of Amazon underperformed the Zacks categorized Electronic Commerce industry on a year-to-date basis. While the industry gained 31.5%, the stock returned 26.4%.

Amazon Fresh

AmazonFresh is the company’s grocery delivery service that was launched in 2007 on a small scale near Amazon’s headquarters in Seattle and was later expanded to Los Angeles.

The service enables users to order groceries online which are delivered either on the same day or the next, thus saving both time and effort. It delivers all items from groceries and household goods to specialty items and products from local merchants.

The service charges $14.99 a month in addition to an Amazon Prime membership.

Opportunities in an Attractive Industry

Per a Cowen & Company report, the U.S. grocery market (food and beverage, and other consumables) is expected to cross $1.3 trillion in 2017.

Grocery is expected to be a major driver of e-commerce growth between 2017 and 2022 with Cowen anticipating sales to increase from $70.6 billion in 2017 to $177 billion in 2022.

We believe Amazon will benefit significantly if it expands to newer locations to beef up grocery.  

Amazon.com, Inc. Price and Consensus

Bottom Line

The new destination is likely to boost AmazonFresh, the company’s grocery delivery service that was launched as a part of Amazon’s diversification initiatives, more so as its e-commerce business faces tough competition from Alibaba (BABA - Free Report) and eBay (EBAY - Free Report) .

Though Amazon is not very optimistic about generating high margins from the grocery delivery service, it expects the expansion to broaden its operational activities (shopping) to different categories from electronics to clothes to household essentials.

ZacksRank

Amazon carries a Zacks Rank #3 (Hold). Another better-ranked stock in the industry is PetMed Express, Inc. (PETS - Free Report) , carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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