Amazon expands its perishable delivery service, putting pressure on traditional grocers

Key Points

• Amazon has expanded its perishable grocery delivery service, available to Prime members in over 1,000 locations, aiming to reach 2,300 by year-end.
• This expansion introduces thousands of perishable items into Amazon's logistics systems and increases competition for traditional grocers like Walmart, Kroger, and Target.
• Prime members can enjoy same-day delivery for orders over $25 for free, with options for smaller orders available at a fee, while non-members face a $12.99 charge regardless of order size.
• Amazon is leveraging artificial intelligence to tailor its grocery offerings to local preferences, further enhancing its grocery sales, which topped $100 billion last year.

NEW YORK (AP) — Amazon is now rolling out a service where its Prime members can order their blueberries and milk at the same time as basic items like batteries and T-shirts and get them within hours.

The online juggernaut said Wednesday that customers in more than 1,000 cities and towns including Raleigh, North Carolina; Milwaukee; and Columbus, Ohio, now have access to fresh groceries with its free same-day delivery service on orders over $25 for Prime members, with plans to reach over 2,300 cities and towns by year-end.

Amazon called the move “one of the most significant grocery expansions” for the online retailer as it introduces thousands of perishable items into its existing logistics network. The expansion is expected to put pressure on grocery delivery services offered by such rivals as Walmart, Kroger and Target, which all saw their shares take a hit in trading Wednesday.

Amazon's shares rose 1%.

Amazon said that if an order doesn’t meet the minimum, members can still choose same-day delivery for a $2.99 fee. For customers without a Prime membership, the service is available with a $12.99 fee, regardless of order size.

In the past, Prime subscribers’ grocery orders were fulfilled through Amazon Fresh or Whole Foods Market.

Prime members pay $14.99 monthly or $139 annually.

Amazon launched its Prime membership in 2005, and it has become the gold standard for subscription services with a slew of perks including unlimited streaming with Prime Video and discounts at Whole Foods and Amazon Fresh. Walmart, which launched its membership program called Walmart + in 2020, has been racing to add more benefits. It costs $12.95 per month or $98 per year. Depending on members' location and availability, Walmart members can schedule same-day delivery for their groceries, including perishables.

“We’re continuously innovating to make grocery shopping simpler, faster, and more affordable for our customers, especially Prime members,” said Doug Herrington, CEO of Worldwide Amazon Stores, in a statement. “By introducing fresh groceries into our Same-Day Delivery service, we’re creating a quick and easy experience for customers. ”

Herrington noted that customers can order milk alongside electronics; oranges, apples, and potatoes with a mystery novel; and frozen pizza at the same time as tools for their next home improvement project—and check out with one cart and have everything delivered to their doorstep within hours.

The company first tested the service in Phoenix, last year, and then added Orlando, Florida and Kansas City, Missouri, earlier this year.

Amazon noted that many of its customers were first-time Amazon grocery shoppers who now return to shop twice as often with the same-day deliver service compared to those who didn't purchase food. It also noted that based on early sales, strawberries now regularly knock AirPods out of the top five best sellers of all products sold, while bananas, Honeycrisp apples, limes, and avocados round out the top ten best-selling perishable grocery items in their same-day delivery carts.

“It's a nice step forward,” said Jason Goldberg, chief commerce strategy officer at Publicis Groupe, a global marketing and communications company. “It definitely makes them more competitive" in perishables.

Goldberg noted that Amazon has struggled to succeed in fresh food and that shoppers have been confused ordering shelf stable items and perishables, and having them appear in different online shopping carts, including Amazon Fresh. He said this move will greatly improve the experience.

Amazon said it generated over $100 billion in gross sales of groceries and household essentials last year not including sales from Whole Foods Market and Amazon Fresh.

In June, Amazon said it was investing more than $4 billion to triple the size of its delivery network by 2026, with a focus on small towns and rural communities across the country.

It also noted that it's using artificial intelligence to help it predict local customer preferences so it can stock popular items alongside items targeted for specific communities