Amazon to make Amazon Fresh free, further strengthening its lead in the online grocery market

On the heels of a expensive bet on one day shipping which took a big chunk of its profits, Amazon increased its offering to connect Prime members up a notch: it just lowered the monthly fee to $ 14.99 for the Amazon Fresh grocery delivery service.

Amazon Prime members in more than 2,000 U.S. cities where the service is now available will have the option to have perishable items, including meat and vegetables, as well as snacks and essential household items free of charge in two. hours via Amazon Fresh and Amazon. -Bought whole foods. Amazon has also streamlined the ordering process to allow Prime members to purchase their local Whole Foods products using its namesake site or mobile app.

Existing Amazon Fresh and Whole Foods delivery customers will first receive the invitation to the service, which recently expanded to cities like Las Vegas, Nashville and Orlando, Amazon said.

Grocery “is one of our fastest growing businesses,” said Stephenie Landry, vice president of grocery delivery at Amazon and a 15-year veteran of the company, in an interview. “It’s in our DNA as a business to identify services that we think consumers will love. … This offer is a game-changer. We are investing a lot (behind this.) ”

She declined to give more details.

Amazon has redesigned some existing distribution centers to meet anticipated demand for fresh produce and opened new facilities specifically focused on Amazon Fresh. The assortment on Amazon Fresh has been expanded to include non-consumable products, such as some of Amazon’s bestsellers and devices. Whole Foods orders will be fulfilled from its physical stores.

Why is it so crucial to please Prime members? Amazon’s membership in the United States rose to 105 million at the end of June, which represents about three-fifths of its buyers, research firm Consumer Intelligence Research Partners estimated.

The free Amazon Fresh service can indeed be a game-changer.

Similar to Amazon’s overnight shipping rollout, the new perk can change the buying behavior of Amazon customers and help increase orders and the amount they spend. Among existing customers, Amazon Fresh spend grew an average of 19% in the year to September, while Amazon Fresh orders jumped 28% in the same period, according to an Edison Trends study of 14,000 online transactions.

But studies have shown a monthly fee of $ 14.99 as a key deterrent wider adoption among Prime members reluctant to pay more than the $ 119 annual Prime membership fee they are already paying, especially when they also have access to the two-hour Prime Now delivery, which allows them to buy free perishable groceries. (To be sure, Amazon Fresh and Prime Now will always show a tip suggestion that customers can choose to edit or disable.)

Amazon Fresh’s share in a 13-contributor market sample, including Amazon Prime Now, Instacart, Fresh Direct, Kroger, Walmart Grocery and Target’s Shipt, same-day delivery service, but excluding demand of Amazon.com at large, fell to 3.1% in the year through August, from 5.9% a year earlier, according to a Rakuten Intelligence study of online receipts of 96 000 US online shoppers.

Amazon Prime Now’s share fell from 9.7% to 10.7% over the same period, while Instacart, which ships groceries on behalf of retailers like Costco and CVS, saw its share drop from 19.6% to 21.5%, according to the study. Walmart, doubling its grocery pickup and delivery service from physical stores, was the biggest winner, according to the Rakuten study.

Once the main obstacle to growth is removed, Amazon Fresh can well expect to reverse this decline and thereby potentially increase Amazon’s already leading market share in the US online grocery market, which Inmar Analytics recently estimated at 36% in 2018.

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