Amazon Makes 2-Hour Grocery Delivery Free for Prime Members

Amazon.com just added a new perk to its popular Prime membership program: free grocery delivery. The retailer announced today that it will start delivering grocery products within a two-hour window to all Prime members living in the 2,000 regions eligible for the service. That means Prime members, who pay $119 per year in the U.S. for free shipping and other benefits, will now also be able to get free grocery shipments. Until now, Prime members had to pay an additional $14.99 per month to get access to Amazon Fresh, a separate program that offered free two-hour grocery delivery. Groceries have been one of the fastest-growing segments at Amazon, and the new program would effectively make Amazon Fresh a free benefit for all Prime members.

Total Retail's Take: Grocery is one of the fastest-growing online product categories, and Amazon is making an aggressive play to capture as much as that market share as possible. Catering to its Prime members with special services and deals, like free two-hour grocery delivery, makes sense when analyzing the lifetime value of those customers. In the short term however, Amazon figures to lose money on this new venture. But that's the benefit of being the online behemoth that is Amazon — it can afford to sacrifice profit in exchange for sales in the short term, a luxury its smaller competitors, particularly regional grocery chains, cannot.

"This is a bold move by Amazon," says Melissa Burdick, co-founder and president of Pacvue, a SaaS advertising platform. "The elimination of its Fresh delivery fee is just one of many strategic shifts ahead of the competition to win (especially in the battle ground grocery space) with the expansion of national one-day delivery, the removal of the additional Prime Pantry subscription fee, and the expansion of Amazon Fresh into more U.S. markets. The vast selection available from Whole Foods, including its popular private-label brand; the elimination of the delivery fee; and quick two-hour delivery and convenience is a compelling offering that will gain many new customers, especially in time for the Q4 holiday rush."