In a step that will tighten the bond between Whole Foods and its new corporate parent Amazon—and disrupt a fast-growing market for grocery e-commerce industrywide—the companies confirmed Thursday they have launched Prime Now same-day delivery capabilities from Whole Foods stores in four markets alongside plans to expand the service to all U.S. Whole Foods stores this year.
Prime Now provides free two-hour delivery on orders of more than $35 for customers belonging to Amazon’s Prime loyalty program, with one-hour deliveries charged $7.99.
In the run-up to a national expansion, Whole Foods said the service was made available starting today in neighborhoods around Austin and Dallas, Texas; Cincinnati; and Virginia Beach, Va.
Prime Now utilizes contracted shoppers and delivery drivers in a manner similar to Instacart, which provides deliveries for orders from multiple stores—including Whole Foods—in the same markets. It would appear the Prime Now offering could overtake Instacart’s current Whole Foods sales, at least among existing Prime members, given both services require its users to pay a delivery or membership fee. But with a membership base estimated in the tens of millions, delivery could also be an engine to win incremental sales to Whole Foods from other competitors.
The addition is not without risk. Chris Mandeville, an analyst with Jefferies, in a note to clients Thursday said the service could put additional strain on Whole Foods stores already struggling with stock issues. Its competitive impact could be mitigated by competitors such as Kroger—which does business in all four of the debut Prime Now markets—augmenting their same-day delivery delivery options with store pickup and value-enhancing offers such as coupon integration.
Industry stocks—by now reliably vulnerable to Amazon-Whole Foods announcements—dipped on the news, but could create buying opportunities, the analyst added.
Amazon Prime, which also provides shipping discounts, streaming television and other benefits, costs $99 for an annual membership, or $12.99 a month. Amazon has not disclosed how many Prime members there are, but estimates a number between 65 million and 80 million in the U.S.
The Prime Now partnership with Whole Foods also represents a new shot at grocery e-commerce for Amazon in cities where it previously offered a separate direct-delivery grocery offering in Amazon Fresh, which required a separate fee on top of its Prime membership to use.
Amazon no longer offers Fresh in the pilot cities for Whole Foods' Prime Now. In this sense, Whole Foods is helping to merge Prime Now and Fresh into a single entity.
“We're happy to bring our customers the convenience of free two-hour delivery through Prime Now and access to thousands of natural and organic groceries and locally sourced favorites,” John Mackey, Whole Foods Market co-founder and CEO, said in a statement. “Together, we have already lowered prices on many items, and this offering makes Prime customers’ lives even easier.”
According to reports, most if not all items at Whole Foods stores would be available to shop on Prime Now. Recently, Prime Now added an array of Whole Foods’ 365 private brand items to its offerings, which also include staple goods and restaurant deliveries in markets where it is available.
Although Prime and Whole Foods still maintain separate loyalty programs, Amazon officials say they are working toward integrating them. Amazon is also building a connection between the brands with special offers for Prime shoppers, particularly on items highlighting signature Whole Foods items, such as a current special price on Fair Trade-certified roses for Valentine’s Day available to Prime members utilizing a coupon.
Delivery from Whole Foods Market through Prime Now is available daily from 8 a.m. to 10 p.m.