Ideas, innovations, and experiments for effective grocery delivery have been cropping up for decades at this point. The conventional wisdom suggests that, at some point, in some form, consumers will realize how convenient and easy it is to order groceries online and have them delivered to their doorstep.

But contrary to this wisdom, no one has stumbled upon the perfect implementation yet. Even if they embraced deliveries during the COVID-19 pandemic, many consumers have switched back to in-store shopping, compelled by their desire to pick just the right produce, make substitution decisions on their own, and participate in the engaging experience of shopping for groceries (even if sometimes that experience might be frustrating or time-consuming). Furthermore, no retailers have hit the right combination of requirements that enables them to earn sufficient profits on their expensive delivery options while still convincing more customers to pay for the service.

Beliefs in the potential for grocery delivery appear so strong though that retailers keep trying, and Amazon is notable in this regard. With its multiple grocery operations, spanning both Amazon Fresh and Whole Foods, Amazon has a sort of natural experimental situation that it can exploit to test different ideas, applied in different channels. Currently for example, all delivery orders through Whole Foods incur a $9.95 delivery fee. But if people order through Amazon Fresh, the cost for delivery varies with the total bill: $9.95 for totals less than $50, $6.95 if people spend between $50 and $100, and free delivery for orders totaling more than $100. In a recent experiment, Amazon also has offered Prime members (who already pay $139 annually for their membership) the option to subscribe to a monthly program for $9.99 that would allow them to receive unlimited deliveries on any orders (Amazon Fresh or Whole Foods), as long as the total was at least $35. These subscribers also would get the benefit of 30-minute pickups for no extra charge (otherwise $4.95 per rush pickup order).

We know—that’s a lot of numbers. Part of the rationale for Amazon’s monthly subscription experiment is to simplify the complex rules and different prices for various delivery purchases. However, this simplified version is still more complex, and more expensive, than a Walmart + membership, which costs $99 and offers same- or next-day delivery on any orders of more than $35. That is, Walmart shoppers only encounter a single fee, and they get essentially the same service.

Discussion Questions

1. Does the described experiment, involving a monthly subscription fee on top of Prime membership fees, seem likely to succeed in establishing Amazon’s grocery delivery offerings?
2. What do grocery retailers need to do to convince shoppers to use delivery options more consistently?

Sources: Tom Ryan, “Does Amazon Need a Grocery Delivery Subscription Offering?” Retail Wire, December 15, 2023; Annie Palmer, “Amazon Tests Grocery Subscription Service for Prime Members,” CNBC, December 7, 2023