Amazon is doubling down on the grocery-delivery space. On Thursday, the company announced that it would begin offering free two-hour Whole Foods deliveries for Amazon Prime members. The move may transform the grocery industry and could feasibly threaten the business of competitors such as Instacart—with whom Whole Foods has an existing delivery partnership. But it also raises a number of questions about the logistics of such an endeavor and what it could mean for our roadways, neighborhoods, and labor system.
With two-hour delivery, a mere $35 minimum purchase amount, and access to thousands of items, Amazon’s program makes sense whether you’re doing a bulk grocery order or you’ve only forgotten a few last-minute dinner essentials. When you place an order, pickers, who may or may not be Whole Foods employees, will collect your requested items, put them in “appropriate packaging,” and hand them off to Amazon Flex contract delivery drivers. These drivers currently make deliveries for other Amazon services, such as Prime Now, AmazonFresh, and Amazon Restaurants, using their own vehicles. Deliveries can be made between 8 a.m. and 10 p.m., and if it really is a last-minute ordeal, you can pay $7.99 for delivery within the hour.
While many home grocery services offer same-day delivery, this is an unprecedented level of convenience and affordability that could change consumer behaviors in a similar way that Prime has changed our online-ordering habits. Many of us already have a Prime membership—Amazon doesn’t disclose this number but reports suggest Amazon has more than 80 million members as of April 2017—and this could further drive adoption. As opposed to Instacart’s $149 annual membership for “free” two-hour deliveries, Amazon’s Whole Foods delivery service really does feel free—it’s a sunk cost. When there’s no incentive to consolidate purchases because of a shipping or delivery fee, we may find ourselves ordering smaller grocery loads on a more frequent basis. Instead of a family making one or two grocery runs each week, we’ll have drivers making multiple runs for hundreds, if not thousands, of families in a community each week. Hopefully drivers will be able to consolidate multiple deliveries into single trips, but even so, that could mean more cars on the road, which could lead to worsened traffic and air quality in our neighborhoods.
It could also change our neighborhoods. The convenience of at-home delivery surely trumps the convenience of trotting down to your local corner store or bodega. Larger grocery chains could also end up consolidating, perhaps relying more on warehouses for supplying our increasing appetite for online orders—online grocery sales are expected to grow into a $100-billion market by the year 2025. Until now, the supermarket has been the centerpiece of many suburban strip malls. With Prime deliveries and grocery deliveries, neighborhood shopping centers could devolve into the same ghost towns as our iconic American shopping malls. Will Amazon see pushback if local jobs and businesses recede?
Like most real-world Amazon expansions, including its brick-and-mortar bookstores, Amazon is kicking off this free delivery endeavor in a limited number of markets. Four to be exact: Austin, Texas, Cincinnati, Dallas, and Virginia Beach, Virginia. Amazon likely picked these areas for a handful of characteristics. These are all small- to medium-size cities—Dallas is the largest with a population topping 1.3 million, while Virginia Beach rings in at less than a half-million residents. They have a mostly temperate climate, a large number of single-family homes, and a well-established car infrastructure. (They don’t have the worst traffic in the world, though the Dallas–Fort Worth metropolitan area is getting there.) From these cities, Amazon can study and learn what works and what doesn’t as it rolls out its free delivery empire more broadly by the year’s end, only touching on challenges that will be presented in greater force in larger cities. While delivery personnel will still have to deal with apartment complexes and condominiums in the test sites, they won’t have to deal with the same issues as in a larger metro such as New York City, where a delivery person may have to scour for a parking spot and then climb seven flights of stairs to make a drop-off. It’s also possible that the density of Amazon Prime members in these cities isn’t as great as in areas like San Francisco, New York, or Los Angeles, preventing delivery personnel from being inundated with requests at the get-go.
And then there’s the delivery aspect. While humans are needed for its grocery-delivery service now—to pick out items at your local Whole Foods store, while another person drives that order to your home—that may not always be the case. Amazon recently applied for a patent for a sidewalk-based delivery robot, a small “autonomous ground vehicle” that can carry items from a delivery truck to a person’s front door. And that’s on top of the company’s existing efforts to make drone delivery happen. Paired with Amazon’s existing interest in self-driving grocery delivery vehicles, it’s possible that human delivery personnel may be the exception rather than the norm in a few years, necessary only when deliveries need to travel up multiple stair flights too challenging for a sidewalk bot or large eight-rotor drone to navigate.
On Amazon’s end, there are also the financial ramifications of these “free” deliveries. In 2016, Amazon lost more than $7 billion because of shipping-related costs. Unless the company again raises the price of its annual Prime subscription service—Amazon did up the price of month-to-month Prime memberships by 18 percent this year—it’s likely that the company will continue to bleed money at the sake of our own convenience, perhaps dipping back into an unprofitable state. It’s unclear how that would bode for the company’s future, but Amazon being as valuable as it is, investors don’t seem panicked.
Amazon is taking its Whole Foods delivery expansion at a reasonable pace, but online grocery sales and deliveries are booming. With an effective nationwide roll out plan, Amazon could crush its smaller competition, at the same time reshaping the way families shop and drive. Amazon will face challenges as it irons out its delivery strategy and vies for nationwide grocery domination, but its greatest challenge may be in pushback as today’s communities evolve into something new.
One more thing
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