Amazon is dropping major hints it's ready to dominate the fresh grocery business
- The head of Amazon's Prime Now division is now also leading its AmazonFresh grocery business.
- AmazonFresh has scaled back while Prime Now expands to new cities.
- Synergies with Whole Foods and Prime Now may prove a winning combination.
Amazon could be about to make some big changes to its grocery business, which currently consists of two services: AmazonFresh and Prime Now.AmazonFresh is the company's oldest grocery delivery service, a traditional online option with a $15-a-month membership cost and reserved delivery times.
Prime Now, on the other hand, is Amazon's two-hour delivery offering, which comes free with Prime. On top of a more limited selection of food, it also offers a small selection of products like Echo devices and seasonal items.
Now, changes at Amazon offer a glimpse at how these two services may be coming together in meaningful ways.
In November, Amazon stopped its Fresh delivery service in parts of New York, New Jersey, Pennsylvania, Delaware, Maryland and California, and it has yet to comment on why it did so.
An Amazon spokeswoman said in a statement to Businss Insider: "We have made changes to our service area and discontinued delivery to select zip codes. AmazonFresh continues to serve customers across the US (Seattle, New York, Boston, Baltimore, Philadelphia, Washington D.C., Chicago, Atlanta, Dallas, Miami, Denver, Los Angeles, San Francisco, and more) and internationally (London, Tokyo, Berlin and Munich)."
At the same time, Amazon is opening new Prime Now hubs in major cities. The service is now available in more than 30 cities and towns, and its food selection has been greatly expanded as it incorporates Whole Foods' assortment of products.At the time of this writing, Prime Now offers a selection of more than 1,000 Whole Foods items and more than 5,500 grocery food offerings in Manhattan. In contrast, AmazonFresh offers about 13,500 grocery items for delivery to Manhattan.
The Amazon executive in charge of Prime Now, VP Stephenie Landry, has also been tapped to lead AmazonFresh.
"If you look around this facility, you're going to see a lot of everyday items - food and consumables," Landry told Recode. "AmazonFresh sells the same types of products but a much greater variety. And so both of them have a lot of synergies and it makes sense to think about them jointly."
Landy also recently took the reigns for Amazon Restaurants - a prepared-food-delivery program that's partnered with local restaurants - which is hosted on the same Amazon website as Prime Now.
That's prompted speculation that Prime Now and AmazonFresh may be joining forces. A Morgan Stanley survey of Prime members shows that Prime Now grocery orders are up. The bank wrote in a note to investors that 48% of people using Prime Now are ordering grocery items with it - more than they are ordering more traditional e-commerce offerings.
The survey was done prior to the Whole Foods acquisition's close and before its products were put on Amazon, so it's possible that adoption has increased even more.
It's tempting to look at Prime Now as Amazon's vehicle for dominating grocery - an area where it's struggled previously. Combining Whole Foods' nationwide grocery footprint and selection with Prime Now's delivery logistics to provide free, two-hour delivery could prove an unbeatable combination.
Landry told Recode that Prime Now and AmazonFresh won't merge - at least, not yet."I actually think that we're going to have lots of different ways to get food to customers. But behind the scenes it makes sense to develop as many efficiencies as possible," she said.
An Amazon spokeswoman told Business Insider that the company does not comment on speculation.