Will free deliveries for Prime members make Amazon the driving force in online grocery?
Amazon.com just added another perk for members of its Prime subscription program. The e-tail giant has dropped the $14.99 monthly charge for grocery deliveries from Amazon Fresh and Whole Foods and added free, two-hour grocery deliveries into the $119 annual membership fee paid by Prime members.
“Grocery delivery is one of the fastest growing businesses at Amazon, and we think this will be one of the most-loved Prime benefits,” said Stephenie Landry, VP of grocery delivery, in a statement.
Prime members who have been receiving home deliveries of groceries via Amazon Fresh or Whole Foods will no longer pay the monthly fee. Others interested in using one of the services now that it doesn’t cost anything extra will need to go to a page set up by Amazon where they can request an invitation to join the program. Amazon has set the program up this way based on the expectation that demand for grocery home deliveries will spike as more Prime members learn about it.
Estimates put the number of current Prime members at over 103,000 in the U.S. Grocery delivery is available in more than 2,000 cities and towns around the country. Data from Second Measure, Recode reports, shows that Amazon has at least a 20 percent market share for online groceries in major markets including Los Angeles, New York and San Francisco.
With the decision to eliminate its monthly fee for grocery deliveries, Amazon appears to be making another investment to gain market share while sacrificing profitability. Last week, Amazon reported that its switch from free two-day delivery to next-day service for Prime members affected its bottom line with earnings per share coming in at $4.23 in the third quarter, down from $5.75 last year.
Last month, Walmart announced it was expanding its Delivery Unlimited grocery subscription plan to stores across the U.S. The service, which is available for a yearly fee of $98, or $12.95 a month, gives members the option of receiving unlimited same-day grocery deliveries from the chain. The retailer expects to offer the service from more than 1,600 stores by the end of the year.
- Ultrafast grocery delivery is now FREE with Prime – Amazon.com
- Amazon’s new plan to dominate grocery delivery: making AmazonFresh totally free for Prime members – Recode/Vox
- Free next-day shipping hits Amazon in its bottom line – RetailWire
- In power move, Walmart expands Delivery Unlimited – RetailWire
DISCUSSION QUESTIONS: Will the addition of free grocery deliveries prompt large numbers of Prime members to use the service? How will Amazon’s announcement affect grocery rivals that also offer home deliveries of groceries?