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Fresh Start

With retail giant Amazon.com Inc. now delivering goods to many of its loyal customers, San Diego-based Venissimo Cheese Inc. doesn’t need to depend solely on walk-in customers craving gourmet items such as the fresh goudas, cheddars and prosciuttos sold in its local stores.

Those can now be delivered by truck to select neighborhoods in San Diego, as well as several in Los Angeles, provided the customers are members of Amazon’s recently expanding AmazonFresh service, offering same-day and next-day deliveries of groceries and specialty food items.

“It’s a much wider reach than we’ve ever had before,” said Gina Freize,who started Venissimo 10 years ago in Mission Hills with her husband, Roger. The couple have since added three more locations in North Park, Del Mar and downtown San Diego.

Among the world’s largest purely-online retailers — with more than $60 billion in total product sales in 2013 — Amazon started AmazonFresh in its home base of Seattle seven years ago, and expanded it last year to San Francisco and Los Angeles. It recently extended the range of its bright-green delivery trucks to ZIP codes in a few central city neighborhoods of San Diego, including Middletown, Five Points, Hillcrest and Golden Hill.

“We’re very happy with the response so far from our AmazonFresh customers in Seattle, Northern California and Southern California,” Amazon spokeswoman Nell Rona said in an email. “We continue to expand into more ZIP codes in both areas, including parts of northern San Diego in the coming weeks.”

A Cheaper Delivery Option for Some

Amazon approaches restaurateurs, grocers and other food purveyors in target markets and arranges profit-sharing terms with businesses that are not made public. The online retailer also does not break down sales for its various products and services.

Including Venissimo, the slate of AmazonFresh retailers now has at least 15 San Diego-headquartered businesses. Those include Bird Rock Coffee Roasters in La Jolla, Café Moto of National City, and others based throughout the region, such as San Diego Honey Co., Sadie Rose Baking Co., Farm to Fork Produce, Seaport Oils & Vinegars and hot sauce maker Hot Licks, according to the AmazonFresh website.

“They generally were looking to include a variety of different kinds of fresh-food items in their service,” Freize said.

She noted that for some of her new far-flung customers, depending on what is ordered and how often, AmazonFresh will be a much cheaper alternative than the overnight or same-day delivery services of traditional parcel shippers.

Delivery customers of AmazonFresh pay a flat fee of $299 per year, which includes the company’s Amazon Prime membership service for general merchandise orders that normally costs $99 by itself. The food service offers next-day or same-day delivery on grocery orders of more than $35, with same-day service generally available for orders placed before noon.

Industry analysts note that the AmazonFresh expansion is part of Amazon’s larger push to extend fast delivery of all merchandise, aided by nationwide growth in its system of distribution and fulfillment centers, along with its delivery vehicle fleet. The company has also talked publicly about one day delivering directly to homes with its own fleet of high-tech aerial drones, though federal officials have yet to sign off on commercial drone-based services.

Amazon recently announced it had expanded its delivery services with “Get it Today” capabilities to customers in six new cities — Baltimore, Dallas, Indianapolis, New York City, Philadelphia and Washington, D.C. — after rolling out the services earlier in Seattle, Los Angeles, San Francisco and Phoenix.

In those cities, the company said, customers can order from Amazon as late as noon, seven days a week, and get items like movies, video games and back-to-school supplies to their home on the same day. Same-day customers under Prime pay $5.99 for shipping of all the items in the same order, with non-Prime customers paying a $9.98 fee for the first item and 99 cents for each additional item ordered.

Committed to Expanding Program

While conquering nearly every retail sector it has entered, 20-year-old Amazon still struggles to consistently post operating profits, and the grocery sector as a whole remains a very low-margin business in the U.S.

But in a recent report on Amazon, Morningstar Equity Research noted that online sales of groceries, along with other household and personal care items, represent a “sizable opportunity” for the online retailer over the next five years.

Amazon leaders’ comments about the early success of AmazonFresh in Seattle and Los Angeles indicate that management remains committed to rolling out the program to as many as 20 additional domestic and international urban markets in 2014, Morningstar said.

“Given its compelling value proposition, expanded consumer staples product assortment, and increasingly rapid delivery options (a byproduct of recent fulfillment center investments), we believe it’s conceivable that AmazonFresh will control over 1 percent of the forecast $950 billion domestic grocery industry within five years,” said equity strategist R.J. Hottovy, who covers Amazon for Chicago-based Morningstar.

That would mean more than $5 billion in annual domestic grocery revenue for Amazon, Hottovy said, and international markets are also shaping up as “potentially lucrative” opportunities for grocery sales.

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