Amazon starts selling groceries

wwebvan2.0.gif(Reuters) Internet retailer has started selling groceries on its Web site, a cautious step into a business that was one of the biggest casualties of the dot-com collapse. The service is limited to non-perishable goods such as cereal, pasta and canned soup, but Amazon can ship those items to any customer, unlike online grocers that only deliver to limited areas. “Because we only carry products when we can offer great prices and free shipping, we don’t carry everything (yet!),” the company said in a notice on its Web site.

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Seattle-based Amazon has seen sales growth slow amid increased competition, and has invested heavily in technology and content to draw in new customers and increase loyalty.

Like many other product categories Amazon has added over the years, groceries were quietly introduced to its Web site on May 25 through a beta, or test, page that indicates the company will evaluate the business before promoting it more widely.

“We try and offer our customers one-destination shopping where they can find everything they need, and groceries are something our customers have been asking for,” Amazon spokeswoman Tracy Ogden said. “As with any of our stores, we are always looking to increase our selection.”

During the Internet boom of the late 1990s, investors poured money in to a number of online grocery stores such as Webvan, which once touted an ambitious plan to spend $1 billion on a warehouse network but went bankrupt after the dot-com crash of 2001.

Another grocer from that era, Peapod, survived and has operations in nine states and Washington D.C., while privately held FreshDirect delivers to the New York City area. Some traditional grocery chains such as Safeway (NYSE:SWYnews) also allow customers in some markets to order groceries online.

Amazon shares rose 21 cents, or 0.6 percent, to close at $33.68 on the Nasdaq on Wednesday.

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