Amazon to Offer Same-Day Groceries Delivery in 2,300 Cities

Packed customer orders at an Amazon Fresh grocery store in Seattle, Washington, US, on Thursday, May 2, 2024. Last year Amazon.com Inc. began offering its Amazon Fresh grocery delivery service to people who don't subscribe to its Prime loyalty program.

(Bloomberg) -- 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 its latest attempt to muscle into the $1 trillion grocery industry led by its top retail competitor Walmart Inc.

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 has spent decades transforming the way people shop, letting them access a broad selection of products via the internet. Its delivery network is well suited to products like phone chargers and paper plates, but figuring out how to sell perishables like milk, meats and produce has proved tricky.

US shoppers spend $1 trillion annually on groceries at more than 45,000 supermarkets around the country, according to the grocery trade group FMI. Online grocery sales represent less than 20% of that. Amazon’s expansion of same-day delivery suggests the company believes it has cracked the code and can shift more food spending online.

Shares of Instacart plummeted almost 11% on the news. Kroger Co. fell 4.3%, Walmart dropped 1.3% and DoorDash Inc. slid about 5%. Amazon rose about 1%.

“Businesses such as Instacart were created to deliver on behalf of existing grocers. DoorDash, Uber and others have also entered the category,” Wedbush Securities Inc. analyst Scott Devitt said Wednesday in a note. “Along comes Amazon with an existing nationwide network of fulfillment centers and delivery trucks that seems to have finally figured out how to store and fulfill perishables in a way to support same-day efforts.”

Walmart, the nation’s largest food seller with a 20%-plus share of the market, has significant advantages, not least thousands of stores that serve as pickup locations and fulfillment centers. The retail giant has also made significant strides in e-commerce and has said it expects to be able to deliver to 95% of US households in less than three hours by the end of the year. Walmart has offered same-day grocery delivery for years and is constantly adding more delivery options.

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The grocery business, which makes up roughly 60% of Walmart’s US sales, continues to grow and draw shoppers looking for low prices and wide selection. Grabbing that share is a challenge for any company, especially with inflation-bit shoppers still watching their wallets.

Amazon has made several attempts over the years to become a major player in groceries. In 2022, the company hired a former Tesco Plc executive named Tony Hoggett to overhaul the operation. He oversaw a major reboot of the company’s physical stores and online operations, only to leave late last year. The division is now run by former Whole Foods Market chief executive officer Jason Buechel.

--With assistance from Dana Wollman.

(Updated with analyst’s comment in fifth paragraph and industry context. A previous version of this story corrected the number of cities and Whole Foods spelling.)

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