Amazon to start delivering groceries in 40 U.S. cities amid fears it’ll destroy local supermarkets

Amazon is planning a major roll-out of an online grocery business that it has been quietly developing for years.

The online retailer has been delivering food to locals in Seattle, Washington- where the internet giant's headquarters are based- but they announced on Tuesday that they plan to expand the operation to include many more U.S. markets.

It will clearly be a cause for concern in the food industry as brick-and-mortar grocery stores will see their markets threatened by the familiar online store.

Gaining ground: Amazon has been delivering groceries in their hometown of Seattle for five years but now they are rolling out those services in more cities, immediately including Los Angeles and soon San Francisco

The move targets one of the largest retail sectors yet to be upended by e-commerce, according to two people familiar with the situation.

While food is a low-margin business, Amazon could outperform similar online grocery services by delivering orders for higher-margin items like electronics at the same time.

One of the people familiar with AmazonFresh's expansion plans said new warehouses will have refrigerated areas for food, but also space nearby to store up to one million general merchandise products, in some cases.

The company has been testing AmazonFresh in its hometown of Seattle for at least five years, delivering fresh produce such as eggs, strawberries and meat with its own fleet of trucks.

Amazon is now planning to expand its grocery business outside Seattle for the first time, starting with Los Angeles as early as this week and the San Francisco Bay Area later this year.

If those new locations go well, the company may launch AmazonFresh in 20 other urban areas in 2014, including some outside the United States, said one of the people.

In danger? The move threatens brick-and-mortar grocery stores as Amazon will provide same-day delivery

First targets: Ralphs, a California-based chain, will be one of the hardest hit by the immediate expansion

Bill Bishop, a prominent supermarket analyst and consultant, said the company was targeting as many as 40 markets, without divulging how he knew of Amazon's plans.

Amazon is not alone in wanting to expand in the online grocery business.

Wal-Mart is testing same-day and next-day delivery of online grocery and general merchandise orders in the San Francisco Bay Area and operates a grocery delivery business in Britain.

'Amazon has been testing this for years and now it's time for them to harvest what they've learned by expanding outside Seattle,' said Bishop, chief architect at Brick Meets Click, a consulting firm focused on retail technology.

Changing styles: In the regions where they will add grocery delivery services, the warehouses will have refrigerated areas to stock the food so it won't spoil

'The fear is that grocery is a loss leader and Amazon will make a profit on sales of other products ordered online at the same time.

'That's an awesomely scary prospect for the grocery business.'

FreshDirect delivers food to homes and offices in some parts of New York City and its trying to expand its service into the Bronx.