Amazon is pulling back its plans for grocery delivery in neighborhoods across at least nine states, two months after plunging deeply into the grocery market with its acquisition of Whole Foods Market, Recode has reported.
The Seattle-based ecommerce giant reportedly has notified customers in certain areas via email that it will shutter its Amazon Fresh service – which, as a $14.99-per-month Prime add-on, offers same- or next-day delivery on fresh groceries, household goods and more – in their neighborhoods later this month, the news outlet said. Current states known to be included are California, Connecticut, Delaware, Maryland, Massachusetts, New Jersey, New York, Pennsylvania and Virginia.
However, service will continue in certain areas of large cities such as New York, Los Angeles, Chicago, Philadelphia and Boston. Reportedly, changes aren't related to the Whole Foods purchase, an Amazon representative told Recode.
Analysts at New York-based Gordon Haskett Research Advisors, in the company’s Weekend Warrior newsletter, agreed that while the details behind Amazon’s actions are sparse, it isn’t difficult to view this as another confirmation that the economics behind fresh grocery delivery remain challenging, and that the associated issues are tough to overcome without reaching the proper scale.
"Grocery delivery is a tricky business to be in, and grocers of all types are still experimenting with different fees and models to figure out what will stick with their shoppers," added Dan Farmer, VP of retail solutions for Toronto-based ecommerce solutions provider Unata. "In fact, grocery is the only vertical that Amazon has had to buy into an existing brick-and-mortar brand, which is testament to how complicated it can be. There is potential they aren't seeing the customer traction that they had expected" with Amazon Fresh.