Google is bringing its same-day grocery delivery service to San Francisco and Los Angeles, expanding on initial tests conducted in the two markets. The service is part of Google Express, which partners with retailers such as Costco and Whole Foods to deliver groceries to consumers within hours of ordering.
The move into grocery delivery puts Google into even more direct competition with Amazon, FreshDirect, Instacart and Safeway. Consumers can become a member of the service for $95 per year, far less than the annual costs for Amazon Prime Fresh ($299) and Instacart Express ($149).
Google Express members will pay $2.99 for delivery of cold grocery items, while nonmembers pay $4.99. The minimum size for an order of fresh groceries is $35.
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Unlike competitors Amazon and Fresh Direct, which maintain their own refrigerated warehouses near cities, Google will make all of its deliveries from its retail partners.
Online grocery delivery has always posed difficulties, not only in the area of food quality but also in the retailer’s ability to make profits. High delivery costs and low margins have often plagued companies trying to enter the food delivery fray, but IBISWorld calculates that the online grocery shopping industry is worth nearly $11 billion in the U.S., and that it is expected to grow 9.6% annually through 2019.
With more consumer demand for these services, Google and Amazon likely feel they have the cash flow to take on, and experiment with, online grocery delivery until they can get it right.
