On Thursday, Amazon announced that it would begin offering free, same-day grocery deliveries from Whole Foods to Prime members in select cities. Immediately, I felt a familiar combination of glee and guilt, the same sense of ambivalence that accompanies each neat new perk Amazon offers its regular customers.
The news was not unexpected. When Amazon bought Whole Foods last year, it was assumed that the company would eventually use its logistics smarts to start offering cheap and fast online delivery from upper-middle-class America’s organic produce-monger of choice, in order to finally make some serious inroads into the grocery business. The immediate rollout will be modest. For now, the service will only be available to Amazon Prime customers in four cities: Austin, Dallas, Virginia Beach, and Cincinnati. Two-hour delivery will be free on orders above $35, and for $7.99, you’ll be able to get your kombucha and hummus delivered within 60 minutes. The company hasn’t said outright how quickly it will bring the service to other cities, but it’s definitely planning for it. “We’re going to have a huge expansion ahead,” an Amazon vice president told reporters.
As a carless Amazon Prime member who lives in a neighborhood with generally subpar grocery options—two stores that sell horrendously wilted produce and a co-op with Whole Foods prices and one-third the selection—I will almost certainly use this service once it finally comes to New York, however many months or years from today that may be. Right now, I order from Fresh Direct, which is reasonably inexpensive and convenient. Sometimes I stop by the Trader Joe’s near my office and lug the bags home on the subway after elbowing through the crowd in the frozen food section and waiting in the cartoonishly long line that snakes through the aisles. Neither of those options can really compete with free two-hour delivery from a store I’d shop at anyway if it were nearby. When I emailed my wife a CNN story about the new Prime service, she responded with just three words. “Best. News. Ever.”
As for the guilt: I’m an economics writer. Like many of my peers, I’ve spent a lot of time worrying about how America seems to be developing a monopoly problem (or, if you want to get technical, an oligopoly problem). Profits are increasingly concentrated in the hands of a small number of powerful companies, particularly in tech. There’s growing evidence that this industry consolidation is disempowering workers and maybe even making the U.S. less entrepreneurial. I can’t escape the feeling that by buying my groceries at Jeff Bezos’ everything store, I’ll be helping to usher in a future where our lives are even more thoroughly dominated by a few corporate behemoths.
It’s not that Amazon is going to take over the grocery business overnight. As of now, it’s a small fish. At the time of the merger, Amazon was responsible for just 0.2 percent of all U.S. grocery sales, CNBC reported, while Whole Foods captured just 1.2 percent. Both were dwarfed by industry leaders Walmart and Kroger, which control more than 14 percent and 7.2 percent of the market, respectively.
But Bezos has a way of driving down margins and siphoning off sales in most industries he enters. In part, that’s because he has the luxury of subsidizing an extremely low margin online retail operation with a highly profitable web services business. Amazon has already started cutting Whole Foods’ notoriously high prices. And it’s not hard to imagine that combining better affordability with painless, free delivery could turn the chain into a much more dominant player that could end up putting a lot of unionized (or at least higher paying) grocery chains in dire straits.
In the meantime, Amazon’s announcement on Thursday could also be bad news for one of its smaller, upstart rivals in the online delivery business: Instacart. The $3.4 billion startup pays a network of roving shoppers to pick up and deliver groceries to customers who order through an app. Up until now, Whole Foods has been an important source of business; in 2016, Instacart signed a five-year deal to become the chain’s exclusive delivery service for perishables. (Whole Foods also invested in the company, though it reportedly owns less than a 1 percent stake.) I haven’t been able to figure out how exactly that agreement squares with Amazon’s new delivery service, but either way it will eventually expire. At that point, Instacart will squarely be in competition with BezosFoods, which will have a built-in price advantage with the estimated 60 million to 90 million households that subscribe to Prime and—given that they already do enough online shopping to sign up for a $99 free shipping program—are presumably more open than most Americans to the idea of ordering their meat, fruit, and vegetables sight unseen from the Internet. It hardly seems like a fair fight.
It’s possible I’m being overly pessimistic. After all, Instacart reportedly gets less than 10 percent of its revenue from Whole Foods, and after the Amazon deal, other grocers lined up to strike partnerships with the startup in order to gird themselves for the Bezos onslaught. Maybe the pairing of Amazon and Whole Foods will force other chains to compete harder in the online delivery space, and Instacart will emerge stronger than ever as a result. It’s just hard to forget how Bezos has vanquished rivals like Diapers.com by waging all-out price war.
What’s frustrating is that, right now, U.S. regulators aren’t even considering these sorts of issues. Modern antitrust law is mostly concerned with keeping prices low for consumers. As long as Amazon’s growth means cheap retail and free shipping, it’s unlikely the government will make a federal case out of its attempts to buy up other businesses, even if that may have serious downsides. Amazon’s purchase of Whole Foods sailed by regulators, in part because nobody was really worried about whether acquiring a grocery store might put Bezos in a better position to crush smaller rivals in the online logistics space.
The thing is, while there are lots of smart people pointing out problems in antitrust law and trying to rethink its foundations, nobody has really come up with a workable new system yet. Even on the level of theory, it’s hard to say definitely how the government should handle a company like Amazon. Back in the real world, it’s up to consumers to make shopping choices that feel somewhat ethical. But those decisions are constrained by a lack of great options. Want to shop with an online superstore that isn’t slowly undercutting all of American retail using profits from its server farms? Who are you going to pick? Jet? Great. It’s owned by Walmart.
At some point, convenience and cost win out, even when it makes you feel a little queasy. Jeff Bezos is training me to get all of my material desires met more or less instantly using his wondrous fulfillment network. Am I going to fight it by paying more for delivery or grappling with my fellow shoppers for bananas? Absolutely not. While I wait for someone to come up with and implement a 21st-century antitrust policy that assuages my fears about corporate hegemony, I’ll try to enjoy having my wild-caught Pacific salmon brought to my front door free on short notice. Maybe I’ll be contributing to the slow ossification of the American economy. But it’s still better than getting ripped off at the co-op.
One more thing
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