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What's in Store: California supplier dishes on AmazonFresh
AmazonFresh provides supplemental revenue stream for California supplier
By Christine Blank
September 01, 2013
Bob Vogel, director of retail operations for Santa Monica Seafood (SMS), had a good laugh when AmazonFresh first approached him about supplying fresh seafood for its Los Angeles Spotlight grocery delivery service.
“They came into Culver City, Calif., and were going to do a 28-mile delivery area. I thought, ‘Do they understand our freeway system?’” Vogel says with a chuckle.
However, after “tearing back the skin and looking at everything Amazon is doing” and testing fresh seafood delivery via AmazonFresh’s Los Angeles Spotlight this spring, Vogel and other company executives realized that the online retail giant’s fulfillment process was sound and provides an opportunity for ancillary income.
“It is a no-brainer: We have the labor in place and we have the product. It’s a nice way to stay current and be able to maintain inflationary growth and expand the brand in a convenient way for those who are challenged with driving,” Vogel says.
The income from AmazonFresh is “very auxiliary” for the California distributor, which also operates two retail stores; it’s an extension of its prepared, grab-and-go items, such as seafood party platters.
However, the AmazonFresh arrangement is delivering more sales than SMS anticipated. “We targeted $300 a day and are doing $200 to $600 a day, and that is on limited codes,” Vogel says. SMS has been selling around 20 fresh SKUs — including wild king salmon fillets and its house-made Spicy Salmon Burgers — to AmazonFresh customers in the Los Angeles area.
“They are asking for more items, but I want to make sure the 20 items are done right first. I am also tracking our order history, to see which items are most popular,” Vogel says.
After delivering orders since early June, Vogel, who oversees fulfillment of twice-daily AmazonFresh pickups out of the retailer’s Santa Monica store, says the fulfillment process runs smoothly. Orders come in at night and are processed first thing in the morning.
“We package everything as we do in the store — fresh fish is wrapped in wax paper, for example — and the driver from AmazonFresh comes at a set time in the morning,” Vogel says. “The product goes into an AmazonFresh triple-lined bag with a bar code, along with several 4-inch thick gel packs. They take it back to [its distribution center] in Culver City, break down the bags to individual purchasers and guarantee delivery within a two-hour window.”
AmazonFresh’s fresh food delivery system, which began in Seattle a few years ago, is giving other grocery-delivery services a run for their money. The online retail giant recently expanded to Los Angeles after six years of successful delivery of fresh groceries in Seattle, where the famous Pike Place Fish Market is its fresh seafood supplier.
“AmazonFresh is a very small percentage of sales, but the percentage goes up in the winter because there is a lot les [tourism business],” says Anders Miller, assistant manager and marketing director of Pike Place Fish Market, which has been working with AmazonFresh’s Seattle Spotlight grocery delivery service since 2007. “I have one guy working on fulfilling the AmazonFresh orders, and in one hour, he can crank out the orders for the day. That more than pays for one guy’s salary.”
While online grocery delivery services such as Peapod and Webvan had lofty profit goals in the 1990s, they went bankrupt in the early 2000s. Until recently, a large competitor with a bankroll and national distribution reach such as Amazon has not taken their place. “In the past few years, I have seen several grocery-delivery services start up and then fail because they didn’t understand the logistics. Amazon already has the vehicles and distribution in place,” Vogel says.
“What they are doing is doorstep delivery from unique companies related to the food industry, such as a meat guy, a cheese guy and a seafood guy. Amazon is positioning itself to play with a vibrant perishable community.”
If all goes well in Los Angeles County, AmazonFresh plans to expand to Orange County, and Santa Monica’s business would also grow. “Our Costa Mesa store would fulfill those orders,” Vogel says.
Vogel believes AmazonFresh will present his company in a positive light because of the way its product is handled and packed in heavily insulated bags. Best of all, if product is lost or damaged after it leaves Santa Monica’s facility, then it is AmazonFresh’s responsibility.
“We are guaranteed a 33- to 36-degree delivery temperature. If the customer is unsatisfied with any of the products, Amazon deals with it,” Vogel says.
Because SMS already has fishmongers at its store, the only extra expense in working with AmazonFresh has been hiring a photographer to take high-quality product photos for the AmazonFresh website. “The expense has been minimal and the possible return is intriguing,” Vogel says.Contributing Editor Christine Blank lives in Lake Mary, Fla.