Amazon is testing a 2-hour grocery-delivery service from Whole Foods (AMZN)

pulse

February 8, 2018 1:26 PM

In four trial cities, Amazon Prime customers can get deliveries from Whole Foods in two hours or less.

Whole Foods and
It's part of Amazon's efforts to sell more grocery items online and expand its Prime Now two-hour delivery service.

Amazon and its subsidiary Whole Foods have started a trial program in four US cities to deliver groceries and other goods directly from Whole Foods. The trial is starting in Austin, Texas; Cincinnati; Dallas; and Virginia Beach, Virginia.

Amazon said in a press release that it planned to roll the program out to more cities this year.

"This is where we're starting," Stephenie Landry, the vice president of Prime Now, told The Seattle Times. "We're going to be expanding."

The program is available exclusively for Amazon Prime members through the Prime Now two-hour delivery service. Delivery is free for orders of at least $35, and customers use Primenow.com or the Prime Now app to order.

Here's the idea: Instead of stocking Whole Foods groceries in a warehouse and starting Prime Now deliveries from there, the new program uses a Whole Foods store as a depot.

Whole Foods' private-label brand, 365 Everyday Value, is already available on Prime Now delivery in some markets, including New York. This program will have a wide selection of Whole Foods items on offer — conceivably, nearly the whole store could be stuffed into a Prime Now bag. It'll include "the vast majority of things that people buy most frequently," Landry told The Seattle Times.

That includes fresh produce, seafood, meat, flowers, baked goods, and dairy products.

Industry experts expected a move like this. Data shows that Whole Foods' brand is one of Amazon's strongest weapons as it tries to take a bigger piece of the grocery pie. Amazon also realigned its Prime Now and Amazon Fresh divisions under Landry’s leadership at the end of 2017.

A 2017 Morgan Stanley survey of Prime members showed Prime Now grocery orders increasing. The bank wrote in a note to investors that 48% of people using Prime Now were ordering grocery items with it — more than they were ordering more traditional e-commerce offerings.

The survey was done before the Whole Foods acquisition's close and before its products were put on Amazon, so it's possible that adoption has increased even more.

Some Whole Foods stores already offer delivery through a partnership with Instacart; it's unclear whether that partnership will continue.

It's tempting to look at Prime Now as Amazon's vehicle for dominating grocery, an area in which it previously struggled. Combining Whole Foods' nationwide grocery footprint and selection with Prime Now's delivery logistics to provide free, two-hour delivery could prove a formidable combination.

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