Many Amazon Fresh shoppers are about to get an unexpected jolt. After years of free delivery for Prime members for orders of $35 or more, the company is now raising that minimum to $150.
At the end of February, orders from its stores or online service for less than $50 will cost $10 per delivery, those between $50 and $100 will cost $7, and those between $100 and $150 will include a $4 fee. One-hour grocery pickup outside its stores will continue to be free.
The adjustment is similar to the 2021 changes at Amazon’s Whole Foods Market chain.
The change also signifies how challenging it is for grocers -- even when the grocer is Amazon -- to find a profitable path to online food shopping, as they compete to keep prices low and satisfy consumer demand for easier and faster digital options.
“Now more than ever, grocers need a grounded view of the future market,” says David Bishop, partner at Brick Meets Click, in its just-released five year forecast of e-grocery spending. Retailers should be “simultaneously strengthening the customer experience to protect their base business and improving the profitability of this higher cost-to-serve mode of shopping.”
Brick Meets Click predicts e-grocery sales will grow at 11.7% annually through 2027.
That shift would mean online purchases will account for 13.6% of the grocery total, up from the current 11.2% share.
While that’s a slower growth rate than seen in the last few years, it’s also an indication of just how important online ordering has become to shoppers in terms of convenience and safety. (About 10% of consumers in its research say that they shop online to avoid COVID and other germs.)
Growth in pickup orders continues to outpace delivery and ship-to-home options.
Barrington, Illinois-based consulting company Brick Meets Click conducted the study with Mercatus. It projects that total grocery sales, excluding inflation’s impact, will grow about 2.5% per year. That’s based on a 1.7% rise in household spending and a 0.8% gain in the number of households.
Both the aging population and declining household size are inhibiting growth.
Brick Meets ClicK anticipates that inflation will come in at an average annual rate of 4.8% per year, declining from 2022’s 10.9% to 2.8% by 2027.
Increasing delivery fees isn’t the only way grocers can boost profits. The Wall Street Journal reports Amazon is looking for other ways to find efficiencies in groceries, and that Whole Foods Market has begun asking suppliers to lower prices now that inflation is slowing.
I can assure you I am not the only prime member who will no longer be using the Amazon Fresh service. In fact, today I just had my first grocery delivery from Walmart - significantly lower cost per item and overall a pleasant experience. I'm still a Prime member but maybe not for much longer.