A recent study from Capgemini found that 38 per cent of USA consumers order groceries online, but that only 14 per cent were willing to pay more for two-hour deliveries.
Nick Carroll, an analyst at Mintel, said Amazon's approach might push up short-term losses but could allow it to grow more quickly. Grovery delivery in one hour comes with a fee while grocery delivery in two hours is free on orders of $35 or more.
Amazon is rolling out the new, free service in phases: Prime members who haven't yet ordered groceries can request an invitation. Before today, Amazon Fresh cost $14.99 per month, so this is a pretty big perk if you happen to be subscribed to Prime.
But the move to make deliveries "free" - free, that is, for those who are already paying $12.99/month or $119/year for Amazon Prime - is a classic Amazon move not just to boost its own usage numbers of the service.
"I've been working in grocery delivery a long time, and I think this offering is truly a game-changer", said Stephenie Landry, Amazon's vice president of grocery delivery, in an interview with GeekWire.
Amazon bought Whole Foods two years ago for $13.7 billion.
Customers can search Amazon's website for offerings from both Whole Foods and AmazonFresh, which have some overlapping inventory. Other players include Instacart and Peapod, which partner with grocery stores to provide delivery. Walmart's expansion into online ordering, and Amazon's expansion into brick-and-mortar retail, show how the retail industry is increasingly becoming one large market, blending online and in-person sales. Increased spending on shipping is one reason Amazon fell short of Wall Street's profit expectations in its third-quarter earnings report last week. The company charges $98 annual fee for grocery delivery. But the expanding consumer appetite for online grocery ordering appears to be changing things. Landry, however, said the business is growing and has expanded this year to areas like Nashville, Orlando and Las Vegas. New customers can order some items on Prime Now for a fee.