(Bloomberg/Dana Wollman and Robin Ajello) — Amazon.com Inc. plans to offer same-day grocery delivery in 2,300 cities by the end of the year, more than doubling the current number and marking a major expansion in its effort to compete with traditional grocers.
Customers will be able to order perishable items such as produce, dairy, meat, seafood and baked goods, alongside frozen foods and household items, the company said in a statement on Wednesday.
Same-day grocery delivery is free for Amazon Prime subscribers on orders over $25 in most cities, it said. For non-members, the service carries a $12.99 fee, regardless of order size.
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“Amazon.com’s latest move to grow food share by offering free same-day delivery of groceries, in tandem with core products for Prime members, could pull some on-demand orders away from rivals like Walmart and Kroger as its $25 minimum order undercuts theirs,” Bloomberg Intelligence analysts Poonam Goyal and Anurag Rana wrote in a note.
Shares of the grocery-delivery company Instacart plummeted almost 11% on the news. Supermarket chain The Kroger Co. fell 4.3%. Walmart Inc., which also offers same-day grocery delivery in some markets, dropped 1.3%. Ahold Delhaize, the owner of supermarket chains Stop & Shop, Food Lion, Giant and Hannaford, slipped 1.3%. Amazon rose less than 1%.
Stocks of Amazon rivals often fall when the company announces a new initiative or expansion, only to recover once investors digest the news.
Over the past few years, Amazon has built a large online business selling such staples as paper products, canned goods, pet food and health and beauty items. Those sales were supercharged when the pandemic forced many people to shop online for groceries and consumables for the first time.
But the company has been trying for years to figure out how to profitably sell fresh food, starting and killing a range of initiatives. The expansion of same-day delivery could theoretically help the online pioneer take on Walmart, which has made strides in its e-commerce operation in recent years and has thousands of stores that serve as pickup locations.
Amazon also has physical grocery stores, including Whole Food Market locations and supermarkets operated under the company’s Fresh brand.
The company’s announcement that it’s expanding food delivery follows a series of robust earnings reports from food- and restaurant-delivery companies, including Uber Technologies Inc., DoorDash Inc. and Instacart that all confirmed US consumers are sticking with their ordering habits, despite broader concerns about the economy.
Amazon’s grocery rivals have struggled to constrain food delivery expenses, passing some of the costs on to consumers in the form of service fees. Still, they have one huge advantage over the e-commerce giant: fleets of stores that serve as online pickup centers. Such offerings have also been popular because they typically don’t come with additional fees.
–With assistance from Jaewon Kang.
(Updated with Amazon shares. A previous version of this story corrected the total number of cities in headline and first paragraph.)
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