Watch Now

Amazon is about to shake up grocery delivery

New Instacart-like service will expand in Europe and US

At this Amazon Fresh store at the Bellevue Factoria Mall in Washington, there is no checkout line –– customers simply walk out (Photo: Amazon)

Third-party food delivery services like Uber Eats and DoorDash have become a part of the fabric of the U.S., with well over 100 million users placing orders on the apps last year. But those companies have begun to realize that delivering from restaurants and convenience stores is just the tip of the iceberg.

Grocery delivery has long been seen as the domain of Instacart and Walmart, but more and more food delivery platforms are experimenting with the service. Take, for example, Uber (NYSE: UBER), which earlier this year introduced same-day, on-demand grocery delivery in 400 U.S. cities, or DoorDash (NYSE: DASH), which just last week rolled out an ultrafast delivery service that will deliver groceries to customers in New York City in 15 minutes or less.

Not to be outdone, though, Amazon (NASDAQ: AMZN) is throwing its hat in the grocery delivery ring. Over the last year, the massive retailer has been developing an Instacart-like business in the U.K. known within the company as Amazon Fresh Marketplace, and according to The Information, Amazon plans to expand the service throughout the U.S. and Europe in 2022.

Amazon Fresh got its start in 2007 and now has 22 physical stores in the U.S. (Photo: Amazon)

Per The Information, the fledgling service currently offers grocery delivery to customers from “two major U.K. supermarkets” via the Amazon app or website. It then leverages drivers from Amazon Flex, the company’s delivery service made up of independent contractors, to fulfill orders on the same day they’re placed.

Now, though, Amazon is ready to expand the new business across the continent and across the pond into the U.S., building on its burgeoning presence in the grocery delivery space.

“Our focus is on providing Amazon customers the best possible experience when it comes to grocery delivery whether that is from Amazon Fresh, Whole Foods Market, or one of our local stores like Bartell’s in Seattle, Morrison’s in London, or Monoprix in Paris,” an Amazon spokesperson told Modern Shipper in an email. “Partnerships with other grocers enable more customers to shop online and allow us to provide Amazon Prime members with more choice, value and convenience while our partners benefit from increased visibility for their selection and service.

“To ensure grocery orders are delivered as quickly as possible we use a variety of delivery partners,” the spokesperson added, suggesting that the company has plans to utilize other services in conjunction with Amazon Flex.

Amazon’s experimentation with grocery delivery began as early as 2007, before the likes of Instacart even existed. It was that year that the company unveiled the first iteration of Amazon Fresh in Seattle, delivering thousands of items from local grocery stores to the city’s residents. After being limited to the Pacific Northwest for over half a decade, the service finally expanded into Los Angeles in 2013, and by the end of the following year, it had become available in most major U.S. cities. 

Watch: More changes to the grocery store supply chain

“We’d been doing a very efficient job with our current distribution model for a wide variety of things,” Amazon CEO Jeff Bezos told Fast Company after the launch. “Diapers? Fine, no problem. Even Cheerios. But there are a bunch of products that you can’t just wrap up in a cardboard box and ship ’em. It doesn’t work for milk. It doesn’t work for hamburgers.”

But Amazon might have waited just a couple years too long — while Fresh was still in its infancy in Seattle, Apoorva Mehta was busy founding Instacart, which by 2015 had become a grocery delivery powerhouse worth over $2 billion.

It wasn’t very long before Amazon began clawing its way back into the race, however. In 2017, the company acquired Whole Foods for nearly $14 billion in a move that many saw as a transformational purchase that could finally allow Amazon to keep pace with Instacart.

But it hasn’t exactly worked out that way — both Amazon and Whole Foods have struggled to disrupt the grocery delivery space, posting U.S. grocery spending market shares of just 1.4% and 1.2%, respectively, in 2020. Compare that to Walmart, which dominated the market with a 22% share.

Amazon’s sales through Whole Foods have also remained stagnant since the acquisition, and reports from Whole Foods employees paint a picture of a company that has struggled to remain viable in the grocery delivery space without pushing its workers to the limit.

But Whole Foods is only a portion of the Amazon grocery delivery equation, and the company won’t necessarily need to rely on in-store employees for long. In 2020, Amazon opened the first of 22 brick-and-mortar Amazon Fresh locations in the U.S., but there’s one key difference between an Amazon Fresh store and a normal supermarket — it doesn’t have a checkout line.

Amazon grocery stores, like this Amazon Fresh store in LA or this Amazon Go Grocery store in Seattle, are equipped with hundreds of weight sensors and cameras scattered throughout the aisles that automatically track shoppers’ selections. Even the stores’ shopping carts, called Dash Carts, are outfitted with technology that tells the company exactly what the customer ordered so shoppers don’t need to check out. They can simply walk out of the store and Amazon will bill them electronically.

The technology was first pioneered at Amazon Go stores in the U.S. in 2018, with plans now in place to introduce it at an additional 580 Amazon Fresh locations in the U.S. by 2023, but the massive marketplace is also ready to roll out its tech worldwide.

Read: Proposed EU legislation could give gig workers employee rights

Read: DoorDash and Instacart go head-to-head on ultrafast grocery delivery

Amazon opened an Amazon Fresh store in London this year, its first application of the “just walk out” shopping model outside of the U.S. Like the U.S. stores, the location in London is also completely till-less, unlike other European grocery stores such as Tesco and Marks & Spencer, which require customers to scan items using their smartphones. London now has six Amazon Fresh locations.

“The patient and rather delicate expansion that the group has taken to date in the U.K., revolving around gradually building its online service, notably in collaboration with Morrisons, and its investment in the rapid delivery channel through Deliveroo, were never to us going to be the full extent of its ambitions,” said Shore Capital analyst Clive Black, who also told The Guardian that Amazon is shooting to have 30 Fresh locations in the country for the first phase of its U.K. expansion.

On paper, it looks like Amazon is in pole position to capitalize on the rollout of its new Amazon Fresh Marketplace service. Besides its budding network of physical Amazon Fresh stores, Amazon can also leverage a network of more than 500 Whole Foods stores across the U.S. and seven in the U.K.

The interior of an Amazon Fresh store, like this one in Woodland Hills, California, is outfitted with weight sensors and cameras that eliminate the need for checkout. (Photo: Amazon)

Amazon’s greatest competitive advantage, though, should be its vast network of fulfillment centers, but there’s one issue — according to estimates from logistics consulting firm MWPVL International, less than 3% of the company’s fulfillment centers are dedicated to fresh food delivery.

That could soon change, however. Amazon has shown a willingness to convert some of its Whole Foods locations into fulfillment centers specifically for online grocery orders, and with more than 500 stores under its control, it could quickly expand its grocery delivery reach by repurposing more of them. Instacart has taken a similar approach, building fulfillment centers near its partnering supermarkets.

Amazon might not want to follow the Instacart model entirely, though. According to The Information, Amazon plans on completing deliveries for Amazon Fresh Marketplace using Amazon Flex, a service composed of independent contractors, or gig workers. That would mirror Instacart’s model, which also uses independent contractors but has come under fire from both the media and the company’s workers for working conditions that have been characterized as unsafe and unfair.

Already, Whole Foods employees have criticized what they say are deteriorating workplace conditions in the wake of the Amazon takeover, and they have even organized strikes against the company. In order for Amazon Fresh Marketplace to be successful, it will need to ensure that its Flex workers don’t do the same.

As of the time of publication, Amazon had not yet responded to Modern Shipper’s request for comment.

You may also like:

This NYC food delivery startup is giving power back to restaurants

Drone Racing League now an FAA-approved drone event organizer

Food delivery apps face EU crackdown: Are US companies next?

One Comment

  1. Dorothy Atwood

    ●▬▬▬▬ ✹ 𝐒𝐭𝐚𝐲 𝐀𝐭 𝐇𝐨𝐦𝐞&𝐖𝐨𝐫𝐤 𝐀𝐭 𝐇𝐨𝐦𝐞 ✹  ▬▬▬▬▬●
    Finally I made $92/hr. It’s time to take some action and you can join it too.It is a simple, dedicated and easy way to get rich. Three weeks from now you will wish you had started today.Simply give it a shot on the accompanying site.

Comments are closed.

Jack Daleo

Jack is a staff writer for FreightWaves and Modern Shipper covering topics like last mile delivery and e-commerce fulfillment. He studied at Northwestern University, majoring in journalism with a certificate in integrated marketing communications. Previously, Jack has written for Backpacker Magazine and enjoys travel, the outdoors, and all things basketball.