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Will the New Amazon Grocery Subscription Take Off or Fall Flat?
Amazon has launched a new subscription-based grocery delivery service aimed at streamlining the shopping experience for its Prime members. This move comes as the retail giant continues its efforts to simplify grocery shopping, a task that has become increasingly complex in recent years.
The grocery market has seen significant fragmentation in recent times. While some shoppers stick to their regular supermarkets, others explore niche markets for specialty foods and seasonal goods. Additionally, a growing number of customers prefer the convenience of online shopping, relying on fulfillment apps to shop for them and deliver groceries to their doorsteps within hours.
Amazon’s latest offering aims to cater to these diverse shopping preferences by providing a grocery delivery service that promises to be convenient and cost-effective. Available for $9.99 per month (or $4.99 for SNAP/EBT customers), the subscription offers unlimited delivery on orders over $35 across 3,500 cities in the U.S. Prime members can also enjoy a 30-day free trial of the service.
Key features of the Prime grocery delivery subscription include:
- Availability at Whole Foods Market, Amazon Fresh, and other local grocery and specialty retailers on Amazon.com
- One-hour delivery windows
- Priority access to recurring reservations on weekly orders
In Amazon’s announcement, Tony Hoggett, senior VP of worldwide grocery stores, highlighted the new subscription as a means to provide additional value and savings on delivery fees for customers who regularly order groceries from Amazon Fresh, Whole Foods Market, and other retailers on Amazon.com. The ultimate goal, he said, is to offer a “best-in-class grocery shopping experience, whether in store or online, grounded in the values Amazon is known for: price, selection, and convenience.”
The new Amazon subscription also provides access to a wide range of national brands and natural and organic foods. It includes one-hour delivery windows at no extra cost where available, unlimited 30-minute pickup on any size order, and priority access to recurring reservations for weekly grocery orders. Customers can shop from local grocery and specialty retailers like Cardenas Markets, Bartell Drugs, Save Mart, Rite Aid, Mission Wine & Spirits, and Pet Food Express.
The new grocery delivery service builds on a pilot program launched in late 2023 in Columbus, Ohio; Sacramento, California; and Denver, Colorado. A recent survey from the pilot showed that over 85% of respondents were extremely or very satisfied with the unlimited free delivery benefit. Customers highlighted savings on delivery fees and increased convenience as key reasons for staying subscribed.
In addition to the delivery benefits, Prime members shopping at Amazon Fresh and Whole Foods Market will have access to exclusive deals both online and in-store. Eligible Prime members can earn unlimited 5% back on purchases when using their Prime Visa online at Amazon.com, Amazon Fresh, and Whole Foods Market.
Amazon’s acquisition of Whole Foods in 2017 for $13.7 billion has played a significant role in expanding its presence in the brick-and-mortar grocery space. The company has since lowered prices, particularly for Prime members, and enhanced its reach in the grocery market.
Discussion Questions
How will Amazon’s new subscription-based grocery delivery service impact the traditional grocery retail model, especially in terms of customer loyalty and market share?
What strategies can conventional supermarkets adopt to remain competitive in this evolving landscape?
Poll
Loading …BrainTrust
Susan O'Neal
General Manager, Promo Intel & Insights, Numerator
David Biernbaum
Founder & President, David Biernbaum & Associates LLC
I like the concept that Amazon Grocery Subscription provides, and I understand it did well in testing, but I believe the program will underperform expectations because Amazon customers might be frustrated with Amazon’s limited choices of brands, sizes, and multipack requirements, or with constantly being redirected to Whole Foods, which carries mostly store brands, and because grocery items are sometimes priced higher than usual, or in some weird way.
Consumers that I talk to prefer using services such as Instacart or Shipt, where it is easy enough to buy groceries in a subscription-like manner, but have more choices, flexible sizing and packaging, same day delivery, and traditional pricing. Sale prices are also available. When I speak of flexible packaging, I’m referring to being able to purchase one given item at a time, rather than a required two-pack or three-pack. Db
Definitely. It’s one reason I don’t use Alexa for recommendations. Prejudiced..
Having spoken to Amazon, the new subscription program provides some uplift from customers who subscribe. During the trial period, engagement was better, basket size was bigger, and frequency of shopping improved. That’s all positive. A lot of consumers who subscribed during the trial were people who already shopped for food at Amazon or Whole Foods, both physically and digitally. There were also some activations from shoppers of lapsed Amazon grocery programs. However, one of the keys to success will be attracting brand new shoppers. The trial did pull in some, but probably not enough for Amazon to receive a major boost to its grocery share. So, this program likely moves the dial a bit, but not by a lot. The lower cost for those on benefits is nice, but I can’t see lower income shoppers flocking to Whole Foods; but it might be attractive for those using local grocers powered by Amazon.
Amazon’s new grocery model makes loyalty more enticing. It rewards consumers (particularly Prime members) who make e-grocery a frequent habit by helping them save time and money.
This model also makes groceries accessible to the masses, as offerings range from value to premium tier. A reasonable minimum order threshold and pricing tiers accommodate lower-income shoppers who need help to stretch every dollar.
If consumers are already Whole Foods grocery customers, or are considering Amazon grocery shopping, this may push them closer. If the consumer is hesitant on online grocery shopping, this won’t move the needle. The convenience and speed are attractive, but so many consumers are focused on value, and still insist on making the trip to the grocery store.
Yes! This is really what the trials proved. I also think that unless you’re buying items you always buy, grocery shopping is quite difficult to do online. That’s one of the reasons why it has relatively low online penetration relative to other categories.
As a home cook who likes to experiment, I can’t imagine anything more boring than ordering the exact same thing week after week. This seems like a niche market to me.
This is underwhelming. Please pique my interest by making it free delivery for less than $35.
Agreed. Its a little more icing on the cake, but it’s not something that millions will take advantage of. It reminds me of the delivery of groceries and placing them in your refrigerator or pantry- I never saw that really take off either.
I’m just not convinced this will be successful. US consumers are so set in their habits when it comes to grocery shopping. Additionally, Amazon and Whole Foods aren’t the typical first stop for grocery, so to create an autopilot program like this for staples just doesn’t really make sense.
Amazon has modeled this program to be as simple and straightforward as Prime. Prime is an amazing value, and this program could be also. But…it doesn’t sound like a money-maker for Amazon. It sounds like a money-losing customer acquisition program. How many deliveries per month can 9.99 cover? Does this new program convert profitable customers (customers who do their own shopping and ‘delivery’ tasks) into unprofitable customers (customers where the grocer is now executing all the tasks)…??? Again, how many deliveries will the $9.99 cover? Time-bound customers are going to like this program a lot. And I understand investing in growth. I don’t understand investing in growth that can’t be profitable.
I’m with Jeff Sward on this one, not sure the math is going to work for Amazon long term. Plus, consumers are weary of high grocery prices and, as highlighted by other colleagues, Whole Foods is typically higher than other grocery chains. So, while inflation is still ripe, I have to pay a $9.99 monthly recurring charge, spend a minimum of $35 at a higher priced grocery store for the luxury of receiving my order in an hour. I see this driving some demand, but not the magnitude that takes significant share away from the larger chains.
Not too excited about the prospects for this service. Big drawback is the variety offered on Amazon versus conventional grocers, and a limited number of those additional retailers participating, And sure, while Whole Foods might be an option for some, there are give or take 500 stores total.
Consumers are fatigued with high grocery prices (for which most of the blame goes to the retailer) and more and more paid membership models. In this context, Amazon’s “ultimate grocery membership” can either be a big win or a big fail depending, primarily, on the breadth of need it can service (assortment). If it’s just one more membership to add to the list, it will fail. If it enables consumer to truly simplify the process, it will win big. If anyone can pull it off, it’s Amazon, but it may take a few years of trial and error.
Actually most of the blame for high prices goes to the government based on our latest national research of supermarket shoppers. Retailers are further down the list. Press release here.
I’m one of the home cooks who likes to go to farmer markets, local specialty shops, etc., and have abandoned the ‘weekly shop’ routine. Consumers’ habits are / have changed and this model doesn’t do a lot to accommodate many cohorts.
Amazon has the finest distribution/delivery system on the planet. In addition, it has a network of warehouses and stores. The company has an uncanny ability to simplify the complicated.
$10.00 a month, and you save…a little bit of time, and some gas. If you just go with the gas savings, you would have to attribute about 60 miles a month for grocery visits. Let’s say your typical trip is a 10 mile round trip. So you would have to go to the store 6 times a month in order for this to offer a return ($3.50 a gallon, 20 miles a gallon = $10.50). Add in some value attributed to your time and this makes a mild amount of sense, depending of course on the quality of the produce.
With that fast analysis this will siphon off some customers in suburban areas, and in urban areas.
But a big impact? I don’t see it.