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Oct 29, 2019

Amazon lowers grocery delivery cost in effort to catch Walmart

Amazon shrugs off profit worries, eyes Walmart's sales lead

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Amazon.com Inc. is lowering the cost of its grocery delivery service Amazon Fresh, the company’s latest effort to get more people to buy fruits, veggies, milk and meats online rather than going to the store. Amazon is also expanding fast delivery of online grocery orders around the country.

Amazon Fresh, available in 22 metropolitan markets, will be included in the standard Prime membership, which includes shipping discounts and video streaming, the Seattle company announced Tuesday. Previously, Prime members had to pay an additional US$15 monthly for Amazon Fresh grocery delivery.

The e-commerce giant hopes to win business from grocery leader Walmart Inc. by lowering prices and offering delivery in as little as one hour. Walmart last month announced it was expanding US$98 annual grocery delivery service to 1,400 stores, undercutting Amazon Prime’s US$119 annual fee.

Walmart and Target Corp. are both investing in delivery options as well as in-store pickup of online orders, all geared toward time-strapped customers looking to simplify their errands. Walmart is experimenting with a service in Pittsburgh and a few other cities to have delivery people enter customers’ homes and put perishables in the refrigerator.

Amazon Fresh launched in Seattle in 2007 as the company’s first foray into fresh-food delivery. The service languished for years and in 2017 Amazon paid US$13.7 billion for Whole Foods Market in its biggest-ever acquisition and an acknowledgment that it needed physical stores to be a serious contender in the $840 billion grocery market. Walmart and its Sam’s Club capture 25 per cent of all grocery spending in the U.S., according to Morgan Stanley, compared with two per cent for Amazon and Whole Foods. Walmart has more than 4,500 U.S. stores, about 10 times the number of Whole Foods locations.

Amazon is hoping quick delivery will help it stand out in the grocery wars. Beginning Tuesday, it will offer free two-hour delivery on orders exceeding $35 from Whole Foods stores in 90 metropolitan markets, and in one hour for an additional fee. Bloomberg reported last month that Amazon was experimenting with fast delivery from Whole Foods in cities like Denver and Portland from its main website without requiring shoppers to download a separate app, which limited its use. Amazon is also recommending for purchase online items its customers purchased in Whole Foods stores.

--With assistance from Matthew Boyle.