Amazon ups online grocery ante with free AmazonFresh

Amazon today made AmazonFresh perishables delivery a free service under its Prime customer benefits program.

With the move, Prime members can now buy groceries online and get same-day delivery at no charge for orders of $35 or more via AmazonFresh. As a result, free grocery delivery is now part of the Prime benefits package, since Amazon’s Prime Now and Prime Pantry programs already offered members free delivery on orders of at least $35. Prime Now also includes delivery and pickup from Whole Foods Market stores in select areas.

Related: AmazonFresh kicks off in Indianapolis

Previously, AmazonFresh delivery cost $14.99 per month on top of the $119 annual Prime membership. Users received free two-hour delivery for orders of $35 or more (a $4.99 fee is charged for orders less than $35), while one-hour delivery cost $4.99 to $7.99 for orders of $35 or more and $9.99 for orders less than $35.

Groceries ordered through AmazonFresh are delivered from Amazon fulfillment centers. Though the program focuses on perishables, products available range from fresh produce, meat and seafood, eggs and dry groceries to household supplies, health care and personal care items. Members also can order best-selling items on Amazon.com, including electronics, home and kitchen products, toys and other offerings.

Related: Amazon predicted to pass Walmart as largest retailer

Early last month, Amazon launched AmazonFresh in Indianapolis, making the service available in 19 major markets overall, including Atlanta, Baltimore, Boston, Chicago, Dallas, Denver, Houston, Las Vegas, Los Angeles, Miami, Minneapolis, New York, Philadelphia, Phoenix, San Diego, San Francisco, Seattle and Washington, D.C.

“Prime members love the convenience of free grocery delivery on Amazon, which is why we’ve made Amazon Fresh a free benefit of Prime, saving customers $14.99 per month,” Stephenie Landry, vice president of grocery delivery at Amazon, said in a statement. “Grocery delivery is one of the fastest-growing businesses at Amazon, and we think this will be one of the most-loved Prime benefits.”

Seattle-based Amazon said it now provides fresh grocery delivery in more than 2,000 cities and towns, and the company plans to expand delivery and pickup service to more areas. The e-tail giant also noted that it has improved the delivery speed for AmazonFresh — with one- and two-hour options in most AmazonFresh cities — and Prime members can shop Whole Foods stores online via Amazon.com or the Amazon App.

“Given the rapid growth of grocery delivery, we expect this will be a popular benefit, so today Prime members currently shopping grocery delivery can continue enjoying these services,” Amazon stated. “All other Prime members who live in one of the more than 2,000 cities and towns where grocery delivery is available can request an invitation to shop AmazonFresh or Whole Foods Market delivery at https://www.amazon.com/fmc/learn-more, and we’ll alert you when you are able to shop.”

The incorporation of AmazonFresh into Prime benefits reflects the importance that Amazon attaches to the grocery category, according to Chris Perry, vice president of global executive education at e-commerce insights firm Edge By Ascential.

“Amazon is tripling down on grocery in advance of the holidays, one of its highest-traffic seasons,” he said. “This grocery delivery fee elimination is just one of multiple moves they’ve made recently to capture market share in this space, including the expansion of same-day and one-day delivery, the removal of add-on and exclusively for Prime item designations, the removal of the additional Prime Pantry subscription fee, the expansion of AmazonFresh into three new U.S. markets, the rollout of two-hour delivery from Whole Foods to over 30 markets and more.”

In its latest Food & Beverage Sector Report, Edge by Ascential estimated that the online channel currently accounts for 3% of the $2.8 trillion in worldwide edible grocery sales. But because of the low e-commerce penetration in the food and beverage category and the market’s size — more than twice that of the next-largest category — online edible grocery sales are projected to expand at a 13% compound annual growth rate through 2024 to reach $162 billion globally.

Amazon will be facing off primarily with Walmart, Edge By Ascential said, noting that the two companies are by far the world’s largest edible grocery retailers. By 2024, food e-commerce sales are forecast to grow from $8 billion to $15 billion at Amazon and from $6 billion to $14 billion at Walmart — more than twice as high as their nearest rival, Costco Wholesale.

“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,” Perry said of AmazonFresh’s integration into Prime. “This has huge potential for the U.S and will undoubtedly be leveraged in the U.K. to advance its position there amidst greater online grocery penetration and more competition, once proven and confirmed in the U.S.”

In part because of the added fee, expansion of AmazonFresh lagged that of Prime Now, Amazon’s same-day grocery delivery and pickup service, including through Whole Foods stores. Amazon, in fact, had pulled AmazonFresh from some markets in fine-tuning its online grocery following the 2017 acquisition of Whole Foods.

Through Prime Now, Prime members can shop thousands of items for delivery from Whole Foods, including fresh and organic produce, bakery, dairy, meat and seafood, floral and daily staples. Alcohol is also available for delivery to customers in some markets.

In May, Amazon expanded Prime Now delivery to Whole Foods stores in 88 U.S. markets with the addition of 13 new metropolitan areas. Prime Now Pickup service was extended to 30 metro areas in April. Both services are free on orders of $35 or more to Prime members (a $4.99 fee is charged for orders less than $35). Two-hour delivery is free for orders $35 and up, while one-hour delivery carries a $7.99 fee. Customers also can get pickup in 30 minutes for a $4.99 fee.

Prime Pantry, launched in 2014, was designed as a stock-up grocery shopping service. Prime members in select regions can order nonperishable foods, beverages, health and beauty aids, household supplies and other products in everyday package sizes from Amazon.com and have them delivered free for orders of $35 or more (a $5.99 flat fee is charged for orders less than $35). Non-Prime members must pay a flat $5.99 shipping fee. Amazon’s website said new Prime Pantry memberships are no longer being offered, though current Prime Pantry members can continue to use the service at $4.99 per month for free delivery on all Pantry orders of $10 or more.