Amazon is expanding its Whole Foods grocery delivery to 10 additional cities, bringing the total markets with the service to 38. The newest cities include Charlotte, Las Vegas, Memphis, Nashville, New Orleans, Oklahoma City, Phoenix, Raleigh, Tucson and Amazon’s hometown, Seattle.
Amazon is also expanding its Whole Foods delivery services in more areas in the New York, Los Angeles and Dallas markets. The delivery service is available through the Amazon Prime Now app. The two-hour delivery is free with a minimum order of $35, and one-hour delivery costs an additional $7.99.
Amazon’s expansion comes on the heels of Walmart’s announcement that its grocery delivery will be available in 100 markets — or 40% of U.S. households — by the end of the year.
This rapid expansion could show the company is either experiencing demand for these services, or it is responding to market leader Walmart in this channel.
Though Walmart’s delivery service is currently available in nearly 50 markets, the company has plans to roll it out to 100 metro areas by the end of the year. Amazon has some significant catching up to do, including in its hometown of Seattle, where Walmart has already established itself in delivery.
Amazon will have a few differentiators that will likely please its loyal customers and may even intrigue some new ones enough to help the company make up ground in market share. For starters, the delivery service is integrated into its Prime business, which includes more than 100 million subscribers.
It also facilitates credit card rewards for Whole Foods purchases, enables a handful of Amazon’s delivery markets to include alcohol sales and allows for those customers to order via Alexa — which may become a bigger deal as voice commerce continues to grow. Research from Rabobank shows Amazon’s alcohol sales skyrocketed by 230% in Germany and grew by 96% in the UK last year. A third of beer drinkers in the UK routinely get their favorite beverage online. Obviously, alcohol delivery has a lot of potential for both sales and differentiation as competition heats up in the grocery delivery space.
Amazon will need as many advantages as it can get as it plays delivery catch up. Not only has Walmart captured 25% of the $800 billion grocery market versus Amazon’s 2%, but the company is working with delivery expert Postmates and its own logistics operation via Jet.com to accelerate its lead. Amazon also has to contend with strong efforts from both Target — planning to deliver to 180 markets by the end of this year through Shipt — and Kroger —which has the service at more than 1,200 locations via Instacart.
Amazon is also significantly behind in its curbside pickup, available now in just two markets and only for Prime members. Conversely, Walmart has more than 1,800 stores with curbside food pickup, while Kroger’s ClickList service is available at more than 1,000 stores.
Though Amazon is behind on paper, the runway is long in this space and Amazon has the e-commerce know-how and infrastructure to scale quickly. The challenge will be in competing with its Whole Foods footprint, which includes about 490 stores, versus Walmart’s more than 5,000 locations. Online and delivery are driven by convenience, but the ultimate convenience is availability.