Amazon turns up the heat again in the grocery world, and especially the delivery of groceries, to make services more enticing in the face of competition from Walmart, as well as a number of delivery companies such as Postmates. Today, the company announced that it would make Amazon Fresh – the fresh delivery service it now offers in around 2,000 cities in the US and elsewhere – free to spend for Prime members, removing the $ 14.99 / month it paid for the service to date.
In addition to free shipping, Amazon provides one and two hour delivery options for faster turnaround, making users' local Whole Foods inventory available online and through the Amazon app.
Prime members who were already using Amazon's grocery delivery services ̵[ads1]1; either for Amazon's proprietary service or to have Amazon-owned Whole Foods shopping delivered – will continue to receive these, now for free. Premier members who may be interested in trying this out for the first time must register here and wait for an invitation. ("Given the rapid growth in grocery delivery, we expect this to be a popular benefit," Amazon explained of the waiting list.)
"Premier members love the convenience of free delivery of groceries on Amazon, which is why we created Amazon Get a free benefit of Prime, saving customers $ 14.99 a month, says Stephenie Landry, CEO of Grocery Delivery, in a statement. "Grocery delivery is one of the fastest growing businesses on Amazon, and we believe this will be one of the the most beloved Prime benefits. "
Making Amazon Fresh free is the latest price-fixing (and reduction) Amazon has made to drive more use of the grocery service, while expanding the sweeteners it allows consumers to sign up for Prime. $ 14.99 per month was introduced in 2016, which is a $ 299 / year reduction that Amazon has previously charged Amazon Fresh customers with, before charging Amazon a subscriber $ 99 per year plus separate shipping fees to use the service.
It is not clear how many customers are already using Amazon Fresh or whether the service is not profitable for the company at this time. Despite the increase in Amazon owning the entire supermarket chain supermarkets, analysts estimated earlier this year that while Amazon still saw its grocery service grow, growth slowed. (To add to that, we've seen some consolidations pointing to Amazon looking for ways to simplify – and reduce the cost – of the grocery offer.)
Despite all this, in the United States, about a year ago was estimated in a separate report that Amazon accounted for about a third of all US grocery delivery.
Grocery delivery is a difficult business, much more perishable than delivering a book or clothing or piece of consumer electronics, but it represents, if done correctly, a frequent line of income. To add to that, Amazon has made fast and free delivery one of the most important cornerstones of expanding its business and attracting customers from using other online shopping options, or visiting actual brick-and-mortar stores.
In other words, whether profitable or not, it makes sense that Amazon would invest in ways to try to increase its grocery delivery service, making it free to be the biggest promise yet (next stop: cash back when using it?). It fits with the company's more general economies of scale: get more users who buy more groceries, and make up the margins in the latter to offset losses from the former.
But the transition to making deliveries "free" – free, that is, for those who are already paying $ 12.99 / month or $ 119 / year for Amazon Prime – is a classic Amazon move, not just to increase their own use number on the service.
The company faces persistent competition from a number of other companies that also provide grocery and delivery. In the UK, just about every major grocery store offers this service directly (or through another non-Amazon partner). And in the United States, just last month, Walmart announced it would expand Unlimited's $ 98-a-year delivery service, which to this day would be a cheaper deal than Amazon's. Both postmates and Doordash are among the hopeful deliverers who also have ambitions to make a dent in this area.