October 26, 2016, 3:41 PM

AmazonFresh e-grocery expands

Prime customers in Chicago and Dallas can now skip the store and buy their groceries from Amazon.

Lead Photo

Accelerating its expansion into e-grocery, Amazon.com Inc. today introduced AmazonFresh to Prime members in Chicago and Dallas. The two cities are the fifth and sixth markets Amazon has added AmazonFresh service to this year.

AmazonFresh is the arm of Amazon that provides same-day or next-day delivery of groceries ordered online, including perishable and frozen foods. Other markets added earlier this year were Boston, Baltimore, Sacramento, Calif., and London. The expansion announced Wednesday effectively doubles the availability of AmazonFresh from a year ago, when it was available in six U.S. markets. Amazon launched AmazonFresh in 2007 in Seattle. It did not expand beyond Seattle until 2013.

Only Amazon Prime subscribers can order from AmazonFresh. Consumers pay $99 annually to join Prime, which gets them access to fast free shipping options and other benefits, including streaming video and music, online photo storage and early access to select shopping deals. Prime members will have to pay an extra $14.99 monthly to use AmazonFresh, but members pay no additional fee for delivery of the grocery items they order.

Amazon has experimented with different pricing for AmazonFresh. Initially consumers paid a per-delivery fee for AmazonFresh. In 2015 Amazon changed the model to a required $299 annually fee (on top of the Prime membership fee). The $14.99 monthly fee effectively reduces that annual amount to $180.

Amazon does not release membership figures for Prime but says Prime customers grew 51% worldwide last year. A report released this week from securities research firm Consumer Intelligence Research Partners (CIRP) estimates 65 million U.S. consumers had Prime memberships as of Sept. 30.

With the expansion Amazon is pushing deeper into the online sale of groceries, a quickly growing market. Online sales of groceries worldwide grew by 15% during the past year and account for 4.4% of the market, according to Kantar Worldpanel. By 2025, Kantar Worldpanel projects e-commerce will grow to 9% of the grocery market and be worth $150 billion worldwide.

Within the United States, e-grocery sales are expected to jump 157% this year and account for 6% of total grocery sales, according to a Morgan Stanley analysis. Internet Retailer’s first-ever 2016 Online Food Report lists the leaders in the web-based grocery market and documents how the online sale of food is suddenly a booming market in the United States, putting to rest the notion that food retailing is the exclusive province of stores.

AmazonFresh also is available in the New York metro area (including parts of Connecticut), northern New Jersey, metropolitan Philadelphia and northern Virginia. It is also available in several areas of California, including Los Angeles, San Diego, San Francisco, Fresno and Riverside.

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