Inc. Closing Fresh Grocery Delivery Service In Some Parts

Updated on, Inc. (NASDAQ:AMZN) Fresh grocery delivery service is shutting down in at least some areas such as parts of Delaware, New Jersey, Pennsylvania, California and Maryland, according to emails sent by the company to their customers. Some customers in Los Angeles and Philadelphia even received a notification about the same, according to Recode.

Reason for closure not known

The Amazon Fresh service costs $14.95 per month in addition to the $99 Prime membership program. After the subscription, fresh groceries and frozen foods are open to customers along with some general merchandise with same day delivery or the next morning, if an order is placed later in the day.

Amazon Fresh, which started over a decade ago, could not make an impression in the $700 billion United States grocery market. When asked about restarting the service in the states where Amazon Fresh is closing, an Amazon spokeswoman told Recode that she could not speculate on the plans of the company. It is possible that Amazon could come up with Amazon Fresh pickup locations, like the one in Seattle.

The news of the closure of the service comes as a surprise as the online retailer recently acquired Whole Foods Market for $13.7 billion. The Whole Foods acquisition is expected to play an important role in Amazon’s grocery delivery going forward. The Amazon spokesperson, however, told Reuters that Amazon Fresh closures have nothing to do with the Whole Foods Deal.

Whole Foods to help expand Amazon Fresh

A report from Food Dive earlier this week said that Amazon aims to use “Whole Foods, at least in part, as a lab that will help it develop new physical retail stores across industries, which could include grocery.” Food Dive also noted that Whole Food Markets could be used as “showrooms” for Amazon services and technology including Amazon Fresh and Prime Now delivery services.

Just last week, Amazon announced strong quarterly results, calming down the concerns that investors had about the impact of Whole Foods’ acquisition on Amazon’s business. Results for the company came in better than expected with sales of $43.7 billion, more than last year’s holiday quarter by around $3 million.

Forecast for the next quarter was also vibrant with Amazon expecting the revenue growth to come somewhere between 28% and 38% year over year basis, compared to the revenue growth of 22% in both 2016 and 2015.

During the earnings call, Chief Financial Officer, Brian Olsavsky, said, “So far so good, and we are thrilled to be finally working together.” He also noted that Amazon is working towards adding Whole Food products to Amazon’s website, and Amazon lockers to Whole Foods locations. Amazon lockers would allow Prime customers to return and pick up the items that were bought online, at Whole Foods stores.

Olsavsky noted that Amazon sees a lot of opportunity in Whole Foods and the lockers. Industry experts even expect Amazon to foray into the pharmaceutical business. Olsavsky did not answer the question directly, but said that the acquisition of Whole Foods gives them many opportunities to expand into other categories.

On Thursday, Amazon shares closed down 0.86% at $1094.22.

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