SEATTLE — Amazon has but to discover the important thing to unlocking big grocery gross sales. Now, the corporate is attempting a brand new tack: free supply for extra individuals.
On Tuesday the corporate introduced free two-hour grocery supply for Prime members in additional than 20 main metropolitan areas. The adjustments remove what had been a month-to-month $14.99 charge for individuals purchasing on Amazon Fresh, its on-line grocery service that delivers milk, eggs, seafood and different perishable merchandise from its warehouses.
The new supply choice is as well as to the free supply Amazon affords to Prime members who store at most Whole Foods Market shops. Both strategies require a minimal buy for $35 to don’t have any supply charges. Prime memberships sometimes price $119 a yr.
Amazon has lengthy needed to make headway within the $700 billion grocery business — it’s not solely an immense market, however a class that clients purchase with excessive frequency.
Amazon purchased Whole Foods two years in the past, by far its largest splash within the business. So far, although, the impression at Whole Foods’s bodily shops and on Amazon’s backside line has been modest. But the glimmers of hope Amazon has seen from buying Whole Foods has largely been from delivery.
“We made Fresh both available to more customers, and much faster, over the past year,” said Stephenie Landry, Amazon’s vice president of grocery delivery. Ms. Landry explained that while Whole Foods orders were fulfilled in the grocery stores, Amazon delivers its Fresh orders from small fulfillment centers located close to customers. “We have opened more of those over the past year, and that’s what enables us to offer free two-hour delivery,” she said.
Amazon Fresh sells a broader selection of branded products like Doritos or Coke that Whole Foods does not carry.
At a traditional grocery store, perishable items account for about two-thirds of sales. For Amazon, excluding Whole Foods, those fresh products make up just about 6 percent of food sales, according to a February report from Bain & Company.
After Amazon bought Whole Foods, traditional grocers have fought back aggressively. While Walmart, Kroger and others offer home delivery for a fee, they have been pushing ways for customers to order online and pick up groceries in their stores, an approach analysts say has been popular in part because it is free.
With its new announcement, Amazon is showing it is willing to spend heavily on delivery where its competitors have not, and make up the costs through other purchases made by Prime members, to undercut the value traditional grocers have been offering.
Amazon has made fast delivery a key to driving more retail sales. Last week, Amazon already said it expected to spend about $1.5 billion this quarter on one-day shipping for Prime customers, and it is now adding free grocery delivery within two-hours to its spending spree. They are long-term bets that Amazon can change customer behavior and expectations in ways that will create more loyalty for Prime customers, who buy more, and more frequently, than non-Prime customers.
In July, The New York Times reported that Amazon was pursuing a new chain of grocery stores designed specifically with pickup and delivery in mind. In September, a local news outlet in Los Angeles reported that a “new-concept Amazon grocery store” was slated to open in November at the site of an old Toys “R” Us store.
Ms. Landry declined to comment on the new stores and whether they would be used as part of the free delivery push.