Amazon’s New Grocery Service: For $299, You Never Have to Leave the House Again

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Would you pay $299 annually if it meant never having to go to the supermarket? Amazon.com is testing a service with that idea in mind. And that’s on top of Amazon’s other services that already eliminate the need to go to the mall.

Amazon Prime, the $79-per-year membership program that includes free two-day shipping on most Amazon purchases, has been enormously successful. The number of subscribers easily doubled over the past two years, and analysts expect Prime membership to triple over the next five years.

One of the most interesting effects of having a Prime membership is that the subscriber tends to make more and more purchases on Amazon. Members assume — with good reason — that Amazon’s prices are competitive on just about anything they might purchase, and shipping is free thanks to the $79 they’ve paid for Prime, so subscribers increasingly turn to Amazon in knee-jerk fashion, often without bothering to shop around. And because there’s no minimum purchase requirement, subscribers have found themselves using Amazon as a substitute for all sorts of small everyday shopping errands, so long as the items aren’t needed right away. Batteries, coffee beans, extension cords: these and many other goods are a quick one-click purchase away on Amazon, saving you the trip to the drugstore, supermarket, home-improvement store, Walmart, or wherever.

(MORE: Amazon Prime: Bigger, More Powerful, More Profitable Than Anyone Imagined)

While there has been plenty of skepticism as to whether online grocery shopping can be a viable business, Amazon has been experimenting with its service, called AmazonFresh, in the Seattle area for years. As Reuters reported, Amazon is now pushing Fresh into the Los Angeles area, with a special twist: a “Prime Fresh” membership is being offered to existing Prime members, who will get free same-day or overnight delivery of grocery orders over $35.

Prime members in L.A. get a free 90-day trial of the service. After that, they’re on the hook for $299 per year for Prime Fresh, unless they choose to cancel the service. The original Prime helped subscribers eliminate many shopping errands, and now the bigger, grocery-based Prime aims to get rid of the need for the most typical shopping errand of all: the weekly trip to the supermarket. Fresh produce, milk, meat, bread, peanut butter: now all this and more is a quick one-click purchase away, right alongside batteries, coffee beans, extension cords, electronics and everything else sold via Amazon.

In addition to free shipping and the assumption of decent prices, another reason that regular old Prime members found themselves spending more on Amazon is the need to “get their money back” for their $79 annual fee. Prime Fresh members will be dropping significantly more annually for the service, so they’ll presumably feel even more of a compulsion to get their money’s worth. All of which points to a whole lot of shopping taking place on Amazon, across a wide range of categories. “It will help to make Amazon the starting point for online purchases — more than it already was — and give consumers even less of a reason to shop anywhere else,” Morningstar equity analyst R.J. Hottovy said to Reuters about Prime Fresh.

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Can Amazon make profits with Fresh and the new subscription plan? That’s unclear. And Amazon may not even care. Thus far, same-day-delivery services from Amazon and other retailers appear to be money losers. Yet as Slate’s Matthew Yglesias put it, Amazon is “a retail juggernaut built on the principle of not doing things profitably.” The world’s largest e-retailer tends to focus first and foremost on how to dominate a retail category, and then figures the profits will come, somehow, some way, down the line.

That kind of business model has to frighten supermarkets, drugstores, bookstores, electronics stores and pretty much every other kind of retailer on the planet.

17 comments
KhoiNguyen
KhoiNguyen

I think Costco should be worry.  If this works out or what they could learn from this, they could muscle into the Costco business.  They arrange the same savings and ship the items to your house.

DianeR
DianeR

Prime membership is a family membership, even if you aren't at the same address.  My two college age children, who live hundreds of miles away from me, are allowed to piggyback on the same free shipping and video streaming.  For us, it's very cost-effective.

MarkBosco
MarkBosco

The ignorance of this author is apparent. His phsyco babble about shoppers who use Amazon Prime and their reason behind their purchases should be submitted to some Psyc journal. Lol! The premise that shoppers purchase products because of a Prime membership and not for any superior pricing is incorrect. Prime membership also offers 1000's of low cost and free movie rentals online. Just that alone has saved our family 100's of dollars a  year. Plus free shipping isn't bad either.

ShawnLa
ShawnLa

Saying that there is no minimum purchase required for free shipping is false. Not all items ship via prime, especially items under 10 dollars. They become "add ons" that you have to have at least 35 or so dollars in other purchases for them to ship for free.



nowheresville
nowheresville

Man, am I ever tired of people telling me I'm a lazy beyotch for using Amazon. Kiss my grits, all of you. I use Amazon because I live in NOWHERESVILLE, the armpit of the universe, where the popular opinion is 'If you can't get it at the Wal-mart, you don't need it', because they're the only game in town. Well I need plenty that I can't get in this hick town, for both my personal life and my work. Thank God for Amazon. I'm sorry to disabuse a bunch of people, but there is life outside the major urban areas of this country. There are still places where there isn't a massive shopping mall every other mile; the nearest - and modest - mall to me is 75 miles away. 

Judgemental attitudes are going to be the death of us all.

killerdrgn
killerdrgn

No thank you! I took a look at the prices of Amazon Fresh and they are no where near price competitive. $4.50 / lbs for chicken thighs? Are you kidding me with these prices?

hivemaster
hivemaster

Yay, another excuse for people to sit on their behinds.

Hermione
Hermione

In the past, I have purchased food items from Amazon, because they offer good prices on items bought in bulk.  However, there is still many food items that I do not need in bulk, so Amazon will not replace the neighborhood grocery store, not for me anyway.

And I do recommend Amazon Prime, but only for those that plan on using the program regularly.  I have used the program to watch movies and TV shows, as well as the free shipping.

KhoiNguyen
KhoiNguyen

@MarkBosco It is true though.  I think subconsciously we tend to buy from Amazon to justify the $79 membership fee.  I'm not disputing the free movies and the low cost.  

I'm saying what the author mentioned in the article rings true.

bobbutts
bobbutts

@nowheresville anything that you reveal on the internet will be unfairly criticized.  It's a sport for people.

nowheresville
nowheresville

@mhungerman Go piss up a rope. I am an avid user of Amazon because I live in the sticks, not because I won't go shop for myself. And what's more, I'd pony up for the grocery service in a heartbeat if it were available in the town 2,000 miles away where my mother lives alone and is battling breast cancer. 

jessandnate2007
jessandnate2007

I think the point is, with new Amazon Fresh, you don't need to buy things in bulk.  They'll have single cans of tomatoes, one apple, a small bottle of milk....it's much different than their current grocery selection.