First, Amazon announced that they will no longer charge for their Amazon Fresh service for Prime members. Amazon Fresh, launched back in 2007, offers proof that not everything Amazon touches turns to gold. This service has slowly expanded without much fanfare, and is now offered in 21 metro markets in the U.S. It has been slow to take off and shows the immense challenges associated with delivering fresh groceries to U.S. households. When launched, this service was priced at $299/year. They later changed to $14.99/month in addition to the cost of a Prime membership. Now, it's free (with a $35 minimum purchase) with Prime but the pricing strategy changes illustrate one core problem of grocery delivery—it is expensive to execute, with the costs of warehouses, trucks and drivers and the trickiness of getting fresh and frozen products into consumers' homes.
In addition to Fresh, Amazon has also been focused on growing their Prime Now program, which delivers from Whole Foods. In fact, there has been so much focus on growing this “instant” delivery service that many Whole Foods stores are becoming overrun with Prime pickers, interfering with the retail customer's shopping experience. And, of course, you can still order directly from Amazon with Pantry and Subscribe & Save. Confused? It's a good bet that consumers are as well. Nevertheless, this relentless pressure on growing delivery has implications for others who are trying to compete (and actually trying to make money) in this space.
The second story is Amazon's confirmation of their first “Amazon branded” (name unknown) grocery store that will open early next year in Southern California. The 35,000-square-foot store is in a former Toys R Us (irony is not dead) and will offer a glimpse at Amazon's latest attempt to penetrate the grocery world. The obvious question is why do they need this, given that they already own Whole Foods and have launched Amazon Go?
