Amazon announced it is merging its Prime delivery service with AmazonFresh, its grocery delivery service.
As a result of the merger, layoffs will occur in the marketplace headquarters. The news comes just a week after Amazon announced another round of layoffs of hundreds of employees, many in the Seattle office.
Currently, the two units operate as different models. AmazonFresh offers a wide selection of groceries for a monthly fee of $14.99 on top of a Prime subscription. Prime Now offers a smaller selection of groceries, but offers no additional fee and delivers within two hours for free and one hour for $7.99.
Diego Tartara, Globant CTO Latin American, said that the merger is an example of how the industry is experimenting in the space to see what works in the digital age.
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"They've discovered that having AmazonFresh as a side service doesn't make sense since it didn't have the expected results," he told FierceRetail. "So now the question is, will combining a not-so-successful AmazonFresh with a very successful PrimeNow, save the service? Additionally, will it enhance Amazon's presence in the CPG space, as they compete with services like Instacart and Walmart grocery delivery?"
The news of the merger comes on the heels of the announcement that Amazon will be delivering Whole Foods groceries via Prime Now.
"We're excited to see how this consolidation will blend with Prime Now's delivery of Whole Foods groceries, and how they work in Alexa's conversational capabilities to become omnirelevant in an industry that is so deeply rooted in the physical space," Tartara added.
According to One Click Retail, Amazon accounted for 18% of all U.S. online grocery orders in 2017. In fact, fresh food sales from Amazon nearly doubled last year due in large part to the acquisition of Whole Foods.
But don't expect this to mean the end of either AmazonFresh or Prime Now, said Deborah Weinswig, founder and CEO of Coresight Research, a global retail think tank. Instead, she sees this move as a way to rationalize operations rather than a closing of service.
"Amazon has long had a number of grocery services—AmazonFresh, Prime Now and Pantry, as well as regular ambient grocery products being sold on the main Amazon site--and the acquisition of Whole Foods added yet another grocery service," she told FierceRetail. "It seems to make sense to streamline and avoid overlap between these various services. This move follows a downscaling of AmazonFresh in November 2017, when the service exited some U.S. markets. All of these actions—including the Whole Foods acquisition—suggest Amazon has found pure-play Internet grocery retailing hard work, and that it is rethinking its approach to selling food."