Amazon.com subscribers received a new option. As Amazon reported on Wednesday, Prime Service now allows customers to receive strawberries, milk, meat, and frozen meals on the same day they order them, as the company expands its rapid delivery option to perishable products.
This is another step by Amazon in competing with delivery services offered by Walmart+ and Instacart.
The new same-day delivery service is free for Prime members who pay $14.99 per month or $139 per year for orders over $25. Non-Prime customers must pay $12.99, regardless of order size, to use the new service. Walmart+ membership, by comparison, costs $98 per year and offers same-day delivery in under three hours, with some orders arriving in 30 minutes.
As of Wednesday, Amazon shoppers in over 1,000 U.S. cities, including Phoenix, Raleigh, and Tampa, can receive same-day delivery of perishable groceries. The company plans to expand the service to 2,300 cities by the end of the year.
Previously, perishable grocery orders for Prime subscribers were fulfilled via Amazon Fresh or Whole Foods Market, but this required an additional $9.99 per month subscription fee to get free delivery on orders over $35. Now the new service fulfills orders through the same-day delivery logistics network.
“This is a significant expansion of Amazon’s digital grocery service as it is offered to a huge base of Prime members at no additional cost,” said Blake Dresch, an eMarketer analyst. “Notably, Amazon lowered the minimum order threshold to $25, which directly threatens Instacart, allowing customers to make quick purchases through Amazon.”
Brian Mulberry, portfolio manager at Zacks Investment Management, noted that the new offering is likely to increase Prime membership, but maintaining high service quality will be key to growth.
The update lowers the entry barrier to Amazon’s grocery market for Prime users and other companies, which could put pressure on Uber Eats and DoorDash, said Steven Zhu, UBS analyst.
Amazon shares rose 1.4% on Wednesday midday, while shares of competitors in the grocery delivery category fell. Instacart shares fell 12.4%, DoorDash 4.8%, Kroger 4.2%. Walmart shares dropped 2.3%, and Uber 0.8%.
In June, Amazon announced a $4 billion investment to ensure same-day and next-day delivery to over 4,000 rural U.S. communities by year-end.
In May, Walmart reported it could offer three-hour delivery to 95% of the U.S. population, helping grow its business.
Amazon’s acceleration of perishable grocery delivery may put pressure on small independent grocery stores across the U.S., said Chadley Lewis, vice president at Moody’s Ratings.
Amazon shoppers “can order milk along with electronics and get the entire order delivered to their doorstep within hours,” said Doug Herrington, CEO of Worldwide Amazon Stores.
Although the company is focused on the U.S. grocery market, it faces challenges in the U.K. working with suppliers, as shown by a study from the Groceries Code Adjudicator regulator.