Amazon is putting a steep new entry price on its “Amazon Fresh” grocery delivery service experiment.
The outlay gives you free delivery on all orders over $50, on top of the benefits of a regular Amazon Prime membership, but it’s now considerably more expensive if you only occasionally want groceries shipped to your door. So far, tests that would open the door to standard Prime members (who’d always pay delivery fees) haven’t led to anything concrete. The pricing doesn’t stack up well next to rivals like Instacart, which both costs less up front ($99 per year) and waives the delivery fees at a lower threshold ($35).
Amazon announced the change in december of last year.
It is interesting to compare Amazon’s pricing to that of a p2p delivery startup like Instacart. Is there a serious cost advantage on Instacart’s side?
Might be. Or Amazon is starting at the high end because Amazon Fresh does now and will for the foreseeable future lack necessary scale to make it self-sustaining.1 Which is to say most technologies and most services start in a place of low reach. What is necessary at the beginning stage is not necessarily so in a latter stage.
There is a lot of competition in the market besides Instacart at least in the areas those companies are testing their services in. Geekwire:
Google Express charges $95/year or $10/month for a membership that provides free delivery except on cold grocery items. (..)
Also competing in the market are delivery services from traditional grocery stores, such as Safeway.
Amazon is also competing with itself. The new Amazon Prime Now delivery service offers standard ($99/year) Prime members free two-hour delivery and $7.99 one-hour delivery on a wide variety of products, including some grocery items, although the selection is much more limited than it is on AmazonFresh.
The most important aspect here is this: The challenge of convenient, affordable grocery delivery is being tackled from different angles today. Given todays infrastructure and adressable market these initiatives are not like Webvan and it is just a matter of time until the right way(s) to market will emerge.
One other tidbit on that note from Business Insider Australia:
According to new data by the e-commerce software maker ChannelAdvisor, Amazon has added 21 new logistics facilities globally over the last 12 months, up 14% from last year, bringing the total to 173 facilities worldwide. Of the 173 facilities, 104 of them are in the North America region, with the rest spread across Europe and Asia.
The 173 logistics facilities include the large fulfillment center warehouse, sortation centres (where packages get pre-sorted for shipping), and Prime Now hub, a separate building to store one-hour delivery items.
No groceries (yet). But these are signs of a company with ambitions.
Also, I would not be surprised if “Prime Fresh” will get more services beyond “Amazon Fresh” added to it as time goes on. Imagine something like a premium version of ‘standard’ Amazon Prime.2
- “Starting” should be in quotes here to be honest: Amazon is testing the service in the Seattle area since 2007. ↩
- I would stress though that this would add complexity to Amazon’s membership bundle offerings. I could see a two-point price discrimination here. But this also just goes further into whale territory. (Amazon serving only power customers.) ↩