Amazon Pantry: Amazon's Latest Venture (Update 1)
Updated from 8:44 a.m. to include additional information in the tenth paragraph.
NEW YORK ( TheStreet) -- Amazon
USA Today , citing three people familiar with the effort, reported Amazon is working on a new business known as Pantry that will allow it to further compete with brick-and-mortar retailers. Amazon's expansion into the consumer package goods business will challenge Wal-Mart
Amazon couldn't be immediately reached for comment for this story.
It makes sense that Amazon is looking to compete with Sam's Club and Costco, given that it already has a membership structure, similar to both of those businesses. Amazon Prime, which allows users to get free, two-day shipping and countless movies and television shows, costs $79 a year. Amazon has never publicly said how many members are in Prime, but the company did say it "signed up millions of new Prime members" during its third quarter , in which it saw revenue rise 24% year over year to $17.09 billion.
For the fourth quarter, the company is expecting revenue to be between $23.5 billion and $26.5 billion. Wall Street estimates call for Amazon to generate $25.9 billion in sales.
Costco recently reported first-quarter results that disappointed Wall Street, as net income rose 2.4% to 96 cents a share, generating $24.47 billion in quarterly revenue, below analysts' expectations of $25.35 billion. Comparable sales for its fiscal first quarter rose 3%.
By comparison, Sam's Club continues to be a standout performer for Wal-Mart. According to Wal-Mart's annual 2012 report, Sam's Club saw net sales increase 8.8% to $53.8 billion, while operating income grew 9% to $1.9 billion. "Members are shopping more frequently, shopping more categories and spending a greater share of their wallet with Sam's Club," the company said in the report.
A quick look on Amazon's Web site showed it is already starting to compete with Sam's Club and Costco for products found in these stores, such as cereal, boxed goods, and cleaning supplies. It offers a feature known as Subscribe & Save, which allows users to receive a discount for the product they're buying when they get regular deliveries of the item. Customers are entitled to an even bigger discount on their delivery if they subscribe to five or more items that arrive in the same month.
Pantry also expands on Amazon Fresh, Amazon's grocery delivery business, as it looks to take on supermarkets. Amazon already has programs up and running in Seattle and Los Angeles, and recently announced its expansion into the San Francisco market. Amazon Fresh, which will be available in select zip codes of San Francisco, costs $299 a year, and allows customers to sign up for same or next-day delivery for vegetables and fresh foods.