Amazon is taking a page from the playbook of traditional grocers.
The e-commerce giant is launching a new grocery pickup service that will allow members of its Prime subscription service to order their groceries online and pick them up at Whole Foods locations.
This is the latest effort by Amazon to experiment with Whole Foods’ physical footprint, which the company acquired in 2017 for $13.7 billion. Since then, Amazon has been developing services like grocery delivery directly from some Whole Foods locations and Amazon lockers within Whole Foods for customers to pick up packages.
Much of the future of grocery—and Amazon’s attempts to dominate it—has been focused on delivery to customers’ homes, a notoriously difficult task. Grocery’s low profit margins make the economics challenging, and keeping items like produce fresh and at the right temperature is a major logistical hurdle.
But now with Amazon’s move to implement pickup at stores, the company is edging further into the turf of traditional grocers. Companies like Kroger and Walmart already offer this type of service, known in the industry as click-and-collect.
Click-and-collect is a much cheaper alternative than delivery to the “last mile”—the final and most costly step of the delivery process that takes a product from a central hub to its final destination. Goldman Sachs has estimated that it costs a traditional grocery store chain $8.02 to pick the items from an online order from the shelf, and nearly $15 more to deliver it.
Amazon will start the new service in Sacramento, Calif. and Virginia Beach, Va., with more cities to come throughout the year. Prime members will place their orders via the Prime Now app and choose a pickup location. The service is free for orders of at least $35 picked up in an hour, or $4.99 for orders in 30 minutes. Shoppers will park in a reserved spot and the groceries will be delivered straight to their car.