There’s been a lot of talk about Amazon’s new service, Amazon Fresh. Available only in certain states, the service boasts same day and early morning delivery, meeting consumers’ needs as effectively as traditional grocers. But, there are plenty of players in the online grocery market. What’s the difference between online grocery retailers? And what’s on the horizon for traditional grocers?
Big Players in the Online Market
The concept of grocery delivery has been around for years, so why has it become such a hot topic now? The answer is simple: the online delivery market is taking a bite out of the traditional grocers' pie. As of 2015, there are 3 major players in the online grocery market: PeaPod, Instacart, and now Amazon Fresh.
Amazon Fresh is directly tied to Amazon Prime. Amazon Prime members pay an annual fee of $99 to ensure their products are delivered as quickly as possible without shipping costs. As it stands, consumers are unable to use the Amazon Fresh service without an Amazon Prime account. The Amazon Fresh service costs $299/year*, “existing Amazon Prime members that upgrade to Prime Fresh will be refunded for their Prime membership on a prorated basis.” (Amazon Fresh)
Seems steep, right? Not comparatively. Consider the top 3 players in the market. Peapod has no membership fees and charges $6.95 for orders over $100. Instacart offers one hour deliveries for $14.99 and two hour deliveries for $3.99. However, if a consumer pays the $99 membership fee, all two hour deliveries over $35 are free. The Amazon membership breaks down to roughly $6 per week (or per delivery if you shop weekly). See the breakdown below.
How Do Traditional Grocers Fit In?
Online delivery is a convenient option, but still has a long way to go in terms of availability. Traditional grocers, such as Von’s, Stop & Shop & Giant, are stepping in by partnering with these online companies (Instacart, Google Express, Amazon) and Uber, which send couriers to stores to pick up groceries and then deliver them within an hour.
(Courtesy Uber)
"The bottom line is that for the supermarket to survive and prosper and grow, it's going to have to offer more services," says Phil Lempert, a consumer behavior analyst who tracks these trends on his site SupermarketGuru.
The Future of Grocery
Maybe the future of grocery is online, but even the seemingly convenient options for consumers take a toll on the actual grocers and ecommerce retailers. Supply chains are disorganized and technology in inventory management needs some serious refinement. However, the possibilities of the online grocery movement are endless.
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*Includes the $99 Amazon Prime membership fee
