Is Amazon immune to inflation? It appears not. Amazon is abandoning one of its most popular services for Prime users - free delivery from Whole Foods - due to a shortage of labour, strain on supply chain and a dip in online sales.
The supermarket, which has offered free delivery for Prime members, will now introduce a $9.95 ($AU14) fee for online orders.
Amazon acquired Whole Foods in 2017 for $13.7 billion ($AU19 billion) and quickly introduced free shipping for Prime members for orders over $35. Soon afterwards, Amazon dropped its monthly charge of $14.99 for delivery from its Amazon Fresh grocery service.
Free shipping has been one of the largest selling points for Prime users, and this service has been around for years. But now, the retailer is conscious that free delivery may indicate a future increase in product prices. Furthermore, with American consumers heading back into stores, the need for online delivery has reduced.
The news was first reported by Bloomberg – Amazon piloted the fee last August in six US markets, including Detroit, Rhode Island, Chicago and Portland, among others. “This service fee helps to cover operating costs, so we can continue to offer the same competitive everyday prices in-store and online at Whole Foods Market,” said an email that was sent to some shoppers during the trial.
In January this year, Amazon dropped its Prime Pantry service to streamline online grocery orders. However, with a strain on supply chains worldwide, the ever-increasing cost of goods and reduction of online orders, it looks like Amazon is rethinking its strategy.
Amazon is not the first business to change its pricing strategy. According to the US Department of Labor, consumer prices hit their highest level in 13 years, hiking by five percent in May 2021. The demand for supply chain is experiencing obstacles, and a labour shortage nationwide is adding to the strain. The CEO of Unilever, Alan Jope, told its investors in June that they’re in a period of “unprecedented commodity inflation.”
Online groceries experienced a huge increase in popularity during the height of the pandemic. In 2020, Whole Foods delivered more than three times the number of online orders compared to 2019. What’s more, the average basket size was increasing compared to pre-pandemic levels. However, as the US readjusts and re-opens, stores are becoming increasingly popular once again, with the reliance on e-commerce not as prominent as 2020.
“Our prices are consistent between the store and online options, which is something you don’t see with a lot of our competitors,” shared a spokesperson for Whole Foods to Business Insider. “We are starting to see more customers come back to shop in stores, which is something we encourage with our contactless payment options.”
Amazon will roll out the new fee from October 25 to its US customers, with all customers notified of the change via email.
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