Amazon Takes Grocery Share

Amazon.com (Nasdaq: AMZN) is expanding into the online grocery market with an announcement this week that it has taken a “significant minority interest” in HomeGrocer.com.

Amazon agreed to pay the grocery delivery service $42.5 million (US$) for a 35 percent stake in the company. Amazon is the Internet’s top book, music and video retailer, stocking more than 4.7 million titles.

Amazon founder and CEO Jeff Bezos says he decided to back the growing grocery service because it has found a unique way to provide service in the personalized world of grocery shopping. “They have a fanatical eye for the customer experience. Their shoppers pick out better produce than I could for myself. The delivery people refuse to be tipped. The company really has an unusual attention to detail.,” Bezos said.

To oversee the company’s investment, Amazon senior vice president for Product Development David Risher will serve on HomeGrocer’s board of directors.

Expanding Service Areas

HomeGrocer.com has been operating in the Seattle, Washington area for about a year and plans to use cash infusions from Amazon and several others to fund a national expansion begun this month. In addition to Amazon’s money, HomeGrocer raise another $5 million from investment firm The Barksdale Group, which invests exclusively in Internet start-ups and had made HomeGrocer.com its first investment.

Another $2.5 million comes from investment firm Liberty Digital, and HomeGrocer says it picked up $2.5 million more from earlier investments.

Expansion started Monday with grocery deliveries available to Portland, Oregon residents. Several communities in California are slated for later this summer, the company said. Grocery sales topped $443 billion in the United States last year, according to HomeGrocer, and some industry observers predict online grocery shopping could increase from $63 million in 1997 to $3.5 billion by 2002.

Home Grocer’s Groceries

HomeGrocer stocks more than 11,000 grocery items in its own private facilities and delivers the products directly to the customer’s home within a set timeframe each day. The service offers name brands, fresh produce, meat, seafood, dairy products and specialty foods, such as ethnic, natural and organic items. It even has its own organic brand of milk: HomeGrocer.com milk. Delivery is free for orders of more than $75, and the company offers a 100-percent-satisfaction guarantee.