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Amazon Will Open Convenience Stores as Grocery Business Expands

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Watch out 7/11: e-commerce giant Inc. (AMZN - Free Report) is opening a new line of convenience stores as part of its grocery business expansion, according to the Wall Street Journal. The stores will be available to Amazon Fresh subscribers, Amazon’s online grocery delivery and ordering service.

The convenience stores will sell milk, produce, and meats, and other perishable items, as well as drive-up destinations where subscribers can pick up their orders and have them brought to their cars. The WSJ notes, citing people familiar with the matter, that customers will also be able to order goods with a longer shelf life like peanut butter and cereal using a touch screen or tablet for same-day delivery.

Amazon’s initiative comes soon after chief rival Wal-Mart Stores Inc. (WMT - Free Report) echoed previous statements about its commitment to its own online grocery business. “When Wal-Mart's online sales growth picked up in the fiscal second quarter, growing roughly 12 percent, management attributed part of the acceleration to this service,” writes CNBC.

Even though digital grocery sales have been slow to take off in general, they now account for roughly 2% of total grocery sales in the U.S., according to IBISWorld. A bustling online grocery business could be a huge opportunity for Amazon, especially as consumers grow more accustomed to picking their groceries out online and having them delivered to their doorstop. However, companies like Amazon and Walmart will need to figure out how to handle perishable inventory, as well as managing refrigerated warehouses.

Amazon Fresh costs $15 per month—in addition to the flat $99 per year Amazon charges for Prime—and is only available in California, New Jersey, New York City, Philadelphia, Boston, Washington, among others. Amazon first launched grocery delivery back in 2007 in Seattle.

Amazon’s interest in brick-and-mortar stores is beginning to pick up in haste. The company recently opened a full-fledged bookstore in Seattle, along with 25 pop-up locations in the U.S.

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