Amazon began Thursday to offer same-day grocery delivery from Whole Foods Market to prominent members in four markets.
For a minimum order of $ 35 US, Premium members receive a free two-hour delivery between 8 am and 10 pm. One hour delivery is available for a fee of $ 7.99.
Among the items that customers can order for delivery are fresh produce, meat and seafood; basic foods; flowers; and some alcoholic drinks. They can place orders at
Prime Now website or via the Prime Now app on an iOS or Android device.
The service is available in the neighborhoods of Austin, Cincinnati, Dallas and Virginia Beach at the moment. It will be expanded in the United States later this year.
The delivery service is in line with Amazon's promise to make Prime the customer rewards program at Whole Foods Market.
"Whole Foods' customers are well off with an average income of $ 95,000 a year," notes Cindy Zhou, Senior Analyst at Constellation Research.
They "are digitally connected and busy, so grocery delivery services are attractive," she told the E-Commerce Times.
Consumer demand is high, according to Zhou.
"Companies like Instacart, which added 80 new markets last year, continue to grow," she said.
"The rise and success of the pre-planned meal [services] as
Blue Apron has shown retailers that people are looking for the experience and benefits of cooking at home, but they are struggling to find the time and are willing to pay for convenience, "said Greg Ng, vice President of PointSource
"This offer hits that sweet spot," he told the E-Commerce Times.
Amazon introduces a two-hour service.
"This will help Amazon to increase its membership," Zhou said.
Austin is home to Whole Foods, and Dallas, Cincinnati and Virginia are high-end cities that "are good test benches to see what would work across the country," said Ray Wang, a senior analyst at Constellation Research.
The announcement of Amazon seems to indicate that it focuses solely on the selected neighborhoods in the four cities instead of deploying delivery services through them.
"They want to test the infrastructure that they have set up to serve the highest and densest neighborhoods," Wang suggested.
"They chose the neighborhoods most likely to use Prime and buy Whole Foods," he told the E-Commerce Times. "They also chose very specific demographics in each neighborhood."
This selectivity is essential to the success of this project.
"Like any trial, it's important to start with a small enough market size to thoroughly analyze and be sensitive to changes in real time while being large enough to collect quality data," Ng said. "The marketing, promotion and empowerment of the employees needed to roll out this program are very risky."
Supermarkets offering delivery services to customers will not be affected by this service, said Mr. Wang of Constellation, because "Whole Foods offers high margin and high quality products."
The delivery of perishable items will be the biggest challenge of the new service.
Perishable food requires a cold food supply chain, Wang said. "Refrigerated trucks, limited delivery times, it's harder than delivering a package."
The non-perishable items ordered by Prime Now can be left on the doorstep of a customer, said Mr. Ng, but "what happens when he makes cottage cheese and that the temperature is 95 degrees? "
The purchase of Whole Foods by Amazon also allowed him to carve out a place in his rival, Instacart, which signed in 2016 a five-year contract with Whole Foods, which would make it the exclusive partner of the food chain for perishable goods. As part of the deal, Whole Foods has invested in Instacart.
This stake in Instacart could help Amazon to dominate the food delivery industry, but perhaps at a hefty price.
Instacart signed last year an agreement with the German grocery chain Aldi, which at the time had 1,300 stores across the United States and planned to increase this number to 2,000.
Amazon could attempt to buy both Instacart and Aldi to acquire their business, although the fact that they agree to sell remains to be seen.