MW Why Amazon's 'major' grocery expansion is bad news for delivery apps and retailers
By Bill Peters
'The reason this announcement is so significant is that Amazon has yet to displace incumbents in the grocery category, at least for perishables,' Wedbush analysts said
Amazon said shoppers in more than 1,000 cities and towns can now order fresh groceries with same-day delivery.
Just last week, shares of delivery platforms Instacart and DoorDash Inc. were rallying - as the former works harder on grocery-delivery personalization, and the latter expands its services in supermarkets. Analysts were also praising Costco Wholesale Corp. after last month's strong sales trends.
But on Wednesday, shares of those companies took a hit after Amazon.com Inc. (AMZN) announced what it called a "major" grocery expansion that Wedbush analysts called a "shot heard round the warehouse" - cranking up the pressure on gig-economy apps and traditional retailers alike.
Shares of Instacart $(CART)$ slid 11.4% on Wednesday, while DoorDash's stock $(DASH)$ fell 5%. Shares of Uber Technologies Inc. (UBER) were down 1%.
Among retailers, Costco shares $(COST)$ shares fell 0.8%, while Walmart Inc. $(WMT)$, which sells a lot of groceries, was down 1.8%. Amazon's stock, meanwhile, was up 1.3%.
UBS analyst Stephen Ju, in a research note on Wednesday, called Amazon's move a "directional negative" for Uber and DoorDash. He said it would add "likely pressure on margins as this update raises the competitive intensity to their intraweek delivery efforts."
Amazon said shoppers in more than 1,000 cities and towns can now order fresh groceries with same-day delivery. The e-commece giant plans to offer that service in more than 2,300 such areas in the U.S. by the end of the year. For Prime members, the company said, that same-day service is free for orders over $25 in "most cities."
For smaller orders, members can get same-day delivery for a $2.99 fee, Amazon noted. Shoppers who aren't Prime members would pay a $12.99 fee for any order.
"This marks one of the most significant grocery expansions for Amazon as the company introduces thousands of perishable food items into its existing logistics network that is already optimized for speed and efficiency," Amazon said in a release.
The expansion, according to Amazon, will complement its grocery-delivery offerings through Amazon Fresh, Whole Foods and other retailers. The company has been building out its warehouse network to make faster deliveries - although, in the process, some drivers have complained of an ever-increasing workload.
Wedbush analysts noted that previously, Prime subscribers could get free same-day delivery from Amazon Fresh on orders that cost more than $100, with a $9.95 delivery fee on Whole Foods grocery orders. The Amazon, they added, began offering a $9.99 monthly subscription last year that offered free delivery, within two hours, on orders over $35 from Whole Foods, Amazon Fresh and other partners.
The analysts said some types of perishable groceries were an area where Amazon had "struggled historically." Wednesday's move, they said, would help it pick up a bigger slice of that market.
"The reason this announcement is so significant is that Amazon has yet to displace incumbents in the grocery category, at least for perishables," the Wedbush team wrote. "Grocery is the biggest retail category and still relatively untouched by the internet."
They noted that Walmart gets more than half of its sales from groceries. The push by the big-box chain, as well as that of its rivals and the gig-economy platforms, made the grocery segment more important to Amazon. Amazon "seems to have finally figured out how to store and fulfill perishables in a way to support same-day efforts," Wedbush added.
The share-price declines on Wednesday for Instacart, DoorDash and Uber, they said, were "reasonable responses" to Amazon's announcement.
-Bill Peters
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(END) Dow Jones Newswires
August 13, 2025 13:37 ET (17:37 GMT)
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