Less than a week after revealing it was dedicated to its one-day delivery investments despite their cutting into profits, Amazon demonstrated its willingness to sacrifice even more to bolster the customer experience, eliminating its $14.99 monthly grocery delivery fee for Prime Members.
The waived fee covers foods delivered under the Amazon Fresh service, as well as goods purchased from Whole Foods. Additionally, Amazon revealed it will start delivering grocery products within a two-hour window (one hour in select locations) to all Prime members living in the 2,000 regions eligible for the service.
“This new Amazon initiative comes on the heels of its acknowledgement on its recent earnings call that next-day delivery costs for Q4 were causing a $1.5 billion adjustment to earnings for the quarter, and we note that the company spent $9 billion on shipping in Q3,” stated Charlie O’Shea of Moody’s in commentary provided to Retail TouchPoints. “This new delivery effort is yet another example of Amazon’s willingness to suffer short-term for the potential for long-term benefit.”
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The two-hour grocery delivery perk will be introduced in phases, according to Amazon VP of Grocery Delivery Stephanie Landry. The service will launch as an invite-only service, starting with Prime members who currently use Amazon Fresh or who have previously ordered deliveries from Whole Foods. Other Prime members can enroll in the program by requesting the invitation.
Landry declined to give a timeline for when free grocery delivery will be rolled out to all Prime members without requiring an invite. Currently, in most areas, Prime customers need to order $35 of groceries to qualify for free delivery. In New York City, the threshold is $50.
“By removing barriers for trial and repeat and adding immense value among such a large population of loyal Prime Members, not to mention leveraging a naturally high traffic season to maximize visibility and consideration, Amazon is setting itself up to jump its market share baseline and leadership position heading into 2020,” said Chris Perry, VP of Global Executive Education at Edge by Ascential in commentary provided to Retail TouchPoints. “This has huge potential for U.S. and will undoubtedly be leveraged in the UK to advance its position there amidst greater online grocery penetration and more competition, once proven and confirmed in the U.S.”
The move surely will deliver a blow to Amazon’s chief competitors, which thrive on membership models similar to Amazon Prime’s current $119 per year fee. Walmart’s unlimited delivery subscription currently costs $98 a year, or $12.95 on a monthly basis. Shipt charges $99 for an annual unlimited delivery membership. Target offers unlimited Shipt deliveries (for orders over $35) for $99 a year. Instacart charges $99 for an annual unlimited free delivery membership.
Amazon Still Wins In Grocery Pricing
Amazon already is outdoing grocery competitors from a pricing standpoint, giving the e-Commerce giant another edge, according to a study from Profitero. During the period from July to September 2019:
- Kroger averaged 1.6% more expensive than Amazon on 156 exactly matched products;
- Jet.com was 3.5% more expensive on 133 products;
- Walmart was 6.2% more expensive on 172 products;
- Instacart was 10.7% more expensive on 137 products; and
- Target was 11.6% more expensive on 153 products.
Upon analyzing daily prices on 12,500 products across all categories, Profitero found that Walmart products are 4.1% more expensive than the same products sold at Amazon, while Target’s are 10.6% more expensive.
