Why Did Amazon Raise Grocery Delivery Fees?
Last week, Amazon significantly increased the size of Amazon Fresh grocery orders necessary to qualify for free shipping for Amazon Prime members. The threshold order for free delivery moved from $35 to $150. The delivery charge for orders less than $50 is now $9.95, dropping to $6.95 and $3.95 for orders over $50 and $100.
Right away, Walmart gleefully pointed out free delivery through Walmart+ still begins with orders of $35 or more. While Amazon and Walmart compete in the grocery business, they come to it from very different places. Walmart is the biggest grocery retailer in the US, leading in sales volume and boasting almost 5,000 locations. Amazon has about 500 Whole Foods and Amazon Fresh stores combined. Amazon’s Amazon Fresh grocery delivery business operates independently of the Amazon Fresh physical stores in markets where there are no stores, and is basically separate from Whole Foods.
Walmart’s grocery store dominance carries over to the Walmart.com business. A greater percentage of Walmart.com orders include grocery in their orders (Chart 1) and Walmart.com grocery shoppers spend more per grocery order (Chart 2). Most important, Walmart.com grocery shoppers rely heavily on curbside pickup for receiving their orders (Chart 3).
Is Amazon’s new delivery pricing an indication that they are throwing in the towel, acknowledging their cost of doing business, or are they trying to push their customers to treat Amazon Fresh as a primary grocery shopping option?