Amazon adds soup to its online offerings

Amazon, the online retailer, has begun selling Kellogg’s Corn Flakes and Campbell’s Cream of Mushroom soup, as it continues its push to establish itself as the dominant online one-stop shopping destination.

The retailer’s US customers can now buy almost 2,000 basic packaged foods online, including 12-packs of Campbell’s Cream of Mushroom soup for $12.99, and multi-packs of 70 individual servings of Kellogg’s Corn Flakes for $28.

The retailer will also pay for the delivery of most grocery orders of more than $25 – underlining the degree to which it is absorbing costs as it expands its online presence into everything from sex toys to loose diamonds.

Amazon said it had gradually expanded the “food and snacks” segment of its online “health and personal care” store in recent months. It said the move mirrored the increasing availability of basic food items at mainstream US drug stores such as CVS and Walgreens.

“We look on this as a drug store, and you are going to find food items in a drug store,” said Tracy Ogden, an Amazon spokeswoman.

By focusing on bulk purchases of non-perishable items delivered by parcel service, Amazon’s grocery sales contrast with the limited number of online grocers in the US such as Peapod, a unit of Royal Ahold, and Safeway.com.

The move also reflects the development of websites such as 1800diapers.com which order bulk sales of low margin packaged items such as baby supplies, creating online competition for discount clubs such as Costco and Wal-Mart’s Sam’s Club.

Amazon’s food selection – beyond canned soup – is also dominated by more upscale, higher-margin brands in line with the demographics of its typical users, with organic products from Wild Oats, the second largest US organic and natural grocery chain, and from Paul Newman’s Natural Organics.

But its bulk purchase pricing is also undercutting its online competition. Campbell’s Beef and Rice chunky soup, for instance, sells for $1.57 a can on Amazon, compared with $2.69 per can on Peapod, the largest US online grocer.

However, one online grocer commented that Amazon’s bulk strategy didn’t seem to present a direct threat to a service that stressed fresh products and reliable and convenient delivery.

Amazon offers a range of estimates for delivery of its food items, with the Campbell’s soup taking up to five weeks. Without free shipping, it would incur standard delivery costs of $9.65.

Online grocery services have been less successful in the US than in Europe, reflecting lower population densities and differing shopping habits.