(Lead photo: courtesy of QUINN ROONEY/GETTY IMAGES)
Amazon is testing FREE two-hour grocery delivery service to its Prime members who pay for Amazon’s $99-a-year Prime membership through Prime Now fast delivery program. Amazon said Prime customers can enjoy free 2-hour delivery on orders over $35 from Whole Foods Market.
By Saurav Bhandary │ Last Updated: Feb. 09, 2018
There has never been a company quite like Amazon. Amazon, officially founded in 1994, launched their website Amazon.com a year after. The company that once started as an online bookstore has reinvented itself time and again. After an immediate success, it expanded to include music and video store. It now sells almost everything including books, music, movies, and housewares. It is changing the way we read, shop, and compute.
Amazon used to control a tiny fraction of the market share in America’s highly fragmented grocery business. Well, not anymore. Amazon is shaking up the entire supermarket industry by acquiring the upscale grocery chain Whole Foods for $13.7 billion in August 2017 (Weinberger, 2017). They recently opened a grocery store in Seattle where customers can pick up their online orders. Amazon Go, their new convenience store, uses sensors and new technology that allows customers to walk in and walk out without having to go through a cashier (Bhattarai & Harwell, 2018). Amazon has already started selling some of their products at Whole Foods, and vice-versa.
It does not stop there. On Thursday, Feb. 8, 2018, Amazon and Whole Foods announced their new free two-hour grocery delivery service from Whole Foods stores to its Prime members in four cities initially, with plans to expand across the US later this year (Day, 2018). “We’re happy to bring our customers the convenience of free two-hour delivery through Prime Now and access to thousands of natural and organic groceries and locally sourced favorites,” said John Mackey, Whole Foods Market Co-founder and CEO in a press release (Amazon.com, Inc., 2018). The move could potentially slice into profits for other food manufacturers such as Walmart, Publix, and Kroger, etc. It could also potentially create a challenge for companies that deliver groceries such as FreshDirect, Peapod, Blue Apron and Sun Basket.
Market reaction to Amazon’s announcement of 2-hour delivery service:
Shares of Walmart, Kroger, and Sprouts on Feb. 8, 2018, after Amazon announced the introduction of 2-hour free grocery delivery services from Whole Foods to its Prime members:
- Kroger: -4.25% @ $27.68 per share
- Walmart: -2.38% @ $100.40 per share
- Sprouts Farmers Market: -2.37% @ $25.99 per share Source: (Chin, 2018)
Note: Amazon Founder and CEO Jeff Bezos bought The Washington Post for $250 million in 2013 (Irwin & Mui, 2013).
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Bhattarai, A., & Harwell, D. (2018, January 23). Inside Amazon Go: The camera-filled convenience store that watches you back. The Chicago Tribune. Retrieved from http://www.chicagotribune.com/business/ct-biz-amazon-go-cashierless-store-20180123-story.html
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Chin, K. (2018, February 08). The Amazon-Whole Foods delivery service may actually be a good thing for other grocers (AMZN, KR, SFM, WMT). Yahoo! Finance. Retrieved from https://finance.yahoo.com/news/amazon-whole-foods-delivery-may-214400377.html
Day, M. (2018, February 07). Amazon to deliver Whole Foods groceries through Prime Now fast delivery program. The Seattle Times. Retrieved from https://www.seattletimes.com/business/amazon/amazon-to-deliver-whole-foods-groceries-through-prime-now-fast-delivery-program/
Irwin, N., & Mui, Y. Q. (2013, August 05). Washington Post sale: Details of Bezos deal. The Washington Post. Retrieved from https://www.washingtonpost.com/business/economy/details-of-bezos-deal-to-buy-washington-post/2013/08/05/968a2bc4-fe1b-11e2-9711-3708310f6f4d_story.html?utm_term=.1a8ffe56e755
Minchillo, J. (2018, February 08). Amazon Whole Foods Delivery. The Associated Press. Retrieved from http://www.apimages.com/metadata/Index/Amazon-Whole-Foods-Delivery/4562e1f72be54756931e5e490fc2c7df/1/0
Weinberger, M. (2017, December 17). The $13.7 billion Whole Foods buy has turned the world against Amazon – and we’ll see the sparks fly next year. Business Insider. Retrieved from http://www.businessinsider.com/amazon-and-whole-foods-versus-everybody-2017-11