Significant Expansion of Fresh Delivery Network
Amazon announced it will double the coverage of its "same-day" fresh delivery service in the U.S. to 2,300 cities by the end of the year, more than doubling from the current number of over 1,000 cities. This expanded range includes not only fresh produce, dairy, meat, and seafood, but also baked and frozen goods, linking with the ordering channels for non-perishable goods that were already available for same-day delivery. Prime members can enjoy this service for free, aiming to boost order growth and enhance user retention.
Industry insiders point out that this move marks Amazon's accelerated penetration into high-frequency consumer categories, striving to gain more market share in daily shopping. As consumer habits shift online, fresh and on-demand delivery services carry high expectations.
Retail and Delivery Sector Stocks Under Pressure
Following the announcement, U.S. retail and delivery sector stocks faced pressure. Although Amazon's stock rose by about 1.4%, competitors' stocks saw significant declines, including grocery delivery platform Maplebear dropping over 11%, DoorDash falling 4%, Kroger declining more than 4%, and Walmart sliding over 2.5%. The market generally believes Amazon's expansion will intensify industry price competition and pressure for delivery network upgrades.
Investment institutions analyze that Amazon's model of binding members with free services may force competitors to adjust pricing strategies or accelerate technology investment, potentially compressing the industry's profit margins in the short term.
Long-Standing Layout in the Fresh Sector
Amazon's presence in the grocery sector hasn't been achieved overnight. As early as 2006, the company launched an online grocery store on its site, and further stepped into offline retail by acquiring Whole Foods Market for $13.7 billion in 2017. Since then, Amazon has continuously invested in smart retail technologies, including physical stores that sense customer pickups and automatically check out, as well as innovative services like palm-reading payment.
In the past, its food business focused on long-shelf-life dry goods, such as toothpaste and canned foods. However, with the improvement in warehousing and cold chain capabilities, Amazon has begun testing the storage and transportation of perishable goods in more distribution centers, laying the foundation for this expansion.
Rising Competition and Increased Investments
Facing strong competition from traditional retail giants like Walmart, Amazon plans to invest approximately $4 billion by 2026 to double the scale of its delivery network. eMarketer data shows Walmart currently leads in U.S. online grocery sales, leveraging its dense store network and in-house delivery team to achieve same-day delivery for over 90% of the U.S. population.
The cities included in Amazon's expansion, such as Phoenix, Orlando, and Kansas City, indicate its nationwide penetration into wider regions. Analysts anticipate that further reaching into smaller cities might be its next strategic focus.
Vast Market Space Attracting Competition
Amazon CEO Andy Jassy previously indicated that the U.S. grocery market size is as high as $800 billion, necessitating an increased share to maintain a lead in long-term competition. IBISWorld reports that the U.S. grocery industry's market value will near $875 billion by 2024, suggesting that even a single-digit market share can yield substantial revenue.
Industry observers believe that future competition in the fresh delivery market will focus on delivery efficiency, product variety, and pricing strategies. With more players increasing their investments, consumer shopping experiences are expected to notably improve, though the industry's profitability model still faces cost pressure tests.
