Whole Foods Market to pilot new grocery delivery fee

Citing increased online grocery volume and operating costs, Whole Foods Market later this month plans to test a $9.95 fee for two-hour deliveries in six metropolitan markets, including for Amazon Prime members.

Parent company Amazon informed Whole Foods customers of the upcoming delivery charge, described as a “service fee,” last week in an email, as well as online in an FAQ. Plans call for the fee to begin Aug. 30 for Whole Foods deliveries in the greater Detroit, Boston and Chicago areas and in Providence, R.I.; Portland, Maine; and Manchester, N.H.

“We are writing to let you know about an upcoming change to Prime grocery delivery benefits at Whole Foods Market in your area,” the customer email from Amazon Prime said. “Starting Aug. 30, 2021, delivery orders from Whole Foods Market in your area will include a $9.95 service fee. This service fee helps to cover operating costs so we can continue to offer the same competitive everyday prices in-store and online at Whole Foods Market.”

The new fee will help cover equipment, technology and other costs from online grocery delivery service, a Whole Foods spokesperson said in an email, noting that the retailer aims to maintain its pricing levels both in-store and online amid rising delivery volume and operating expenses. In ramping up its delivery business and expanding the service area, Whole Foods delivered over three times as many orders in 2020 as in 2019 and has seen average basket sizes continue to grow since the start of this year.

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The Whole Foods delivery fee comes over two months after Amazon said it will phase out its Prime Now delivery program and integrate it into Amazon.com and the Amazon app.

One-hour grocery pickup at Whole Foods will remain free for Prime members on orders of $35 or more, Amazon said in the customer email. At Whole Foods, Prime member benefits also include special deals throughout the year plus another 10% savings on sales prices across the store, excluding alcohol. Holders of the Amazon Prime Rewards Visa card also get 5% back on all purchases in-store and online at Whole Foods.

Amazon and Whole Foods didn’t say if the new grocery delivery fee would be expanded to other markets. Two-hour delivery and pickup for orders of at least $35 will remain free for Prime members at Amazon Fresh supermarkets, Amazon’s online FAQ said.

The Whole Foods spokesperson said the retailer benchmarked against other companies and found that a service fee is common. Whole Foods also is seeing a shift between online orders and in-store visits as customers return to brick-and-mortar shopping, leading the chain to invest in initiatives and technology to enhance in-store experience, including bringing back prepared foods, expanding the local product assortment, introducing Amazon One palm-scan checkout, and allowing customers to pick up and return their Amazon packages at stores.

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If the new fee is expanded to more areas, Whole Foods online shoppers could lose a key perk of the $119-per-year Amazon Prime membership: free two-hour delivery of groceries for orders of $35 or more.

In late October 2019, Amazon Fresh perishables delivery became a free service under the Prime customer benefits program. With the move, Amazon essentially made same-day, online grocery delivery a free service for Prime members placing orders of at least $35. Amazon’s Prime Now and Prime Pantry programs already offered members free delivery for that order minimum. Prime members seeking faster service, such as one-hour delivery and 30-minute pickup, pay an extra fee.

Overall in the United States, Austin, Texas-based Whole Foods operates 505 stores in 43 states.

This past May, Seattle-based Amazon announced plans to retire its Prime Now same-day delivery and pickup program — also offered through Whole Foods stores — and integrate the service into its mainline website and mobile app. Amazon launched the Prime Now app in December 2014 for one-hour delivery daily essentials. The service was extended to groceries from Whole Foods, acquired by Amazon in August 2017, starting in February 2018.