Amazon.com, Inc. (NASDAQ:AMZN) announced recently that it is purging the fee charged on grocery delivery for its Prime members within the U.S. The move is prompted by the rising price wars between online retailers. This is due to the uncontrolled expansion of food delivery business in the region, especially from rivals such as Walmart, FreshDirect, Instacart, Kroger, and others. According to Amazon, the aim of eliminating grocery delivery fees for its Prime members is basically to enable the firm to retain its position and boost its online sales amid stiff competition.
Initially, the company was charging between $35 and $50 delivery fee for fresh grocery deliveries to its Prime clients through its grocery-delivery app. In addition, there was a monthly subscription fee of $14.99 for grocery delivery for its customers. All the charges have been eliminated to allow Prime members to shop and get deliveries free of charge. However, one has to be a member by paying an annual membership fee of $119 in order to access the free grocery delivery services. If Amazon’s strategy is implemented, it will absolutely destabilize Walmart’s Delivery Unlimited initiative that charges a $12.95 monthly subscription that was launched in September 2019. Also, this effect is expected to change the whole market parameters as other rivals may soon follow suit.
The firm intends to roll out the free delivery service in various phases, starting with the old prime members. However, the new subscribers are requested to apply for the new service by following the criteria and fulfilling the required terms and conditions. Furthermore, Amazon is also planning to make changes to its Whole Foods deliveries to allow customers to access Whole Food grocery items via Amazon.com and Amazon app in addition to the existing Prime Now app. This will enable consumers to have alternative channels and prompt services.
In the recent past, online grocery delivery business has failed to take momentum in the U.S. due to the high costs charged on delivery services. Though, with free delivery services, Amazon believes it will still penetrate the markets in the region and beyond.