Amazon Plans for Whole Foods to Make Deliveries

By Douglas A. McIntyre Updated Jan 12, 3:37AM EST · Published Feb 8, 6:25AM EST

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Amazon Plans for Whole Foods to Make Deliveries — © Thinkstock

While it may be another one of Jeff Bezos’s ideas to gain market share while losing money, the Amazon.com Inc. (NASDAQ: AMZN) grocery store business will start to make deliveries. It is a way to flank major rivals that do not have similar services.

The delivery service will be part of Amazon’s Prime free delivery and streaming video operation. Management of the e-commerce and cloud computing company said:

Amazon and Whole Foods Market today announced the introduction of free two-hour delivery of natural and organic products from Whole Foods Market through Prime Now, with plans to expand across the U.S. in 2018. Starting today, Prime customers in neighborhoods of Austin, Cincinnati, Dallas and Virginia Beach can shop through Prime Now for bestselling items including fresh produce, high quality meat and seafood, everyday staples and other locally sourced items from Whole Foods Market. Customers can start shopping from Whole Foods Market selection at www.primenow.com or by using the Prime Now app available on Android and iOS devices.

The project does three things for Amazon, even if it initially makes no money. First, it allows Amazon to test delivery in a few relatively small cities. While Dallas and Cincinnati may not be small by many definitions, the test is not taking place in locations where it would be more expensive, like New York or Los Angeles. It is a small investment to prove a concept.

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Second, it is a chance to bolster the offerings of Prime. Amazon raised the monthly price of the service to $12.99 from $10.99 earlier this year. The primary benefits of Prime are free delivery of many products sold at Amazon.com, a huge streaming media library and discounts on some items. Amazon has a great deal of competition in the free delivery business for items it sells. Prime’s video business faces a number of powerful competitors, led by Netflix and Apple.

Finally, Amazon has to beat its competition. Walmart and Kroger are much larger than Whole Foods, and together they have a huge portion of the grocery store market in the United States. However, neither has a significant grocery delivery system. Amazon may be able to drive customers with its grocery delivery operations.

Bezos has once again started to turn a large segment of a U.S. industry on its head. So far, many of his bets have been successful.

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About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.