Lowers the threshold for free grocery delivery
- AMZN is reducing the free delivery threshold for Prime members on its Amazon Fresh grocery service from US$150 to US$100.
- AMZN brand power, convenience, and product range keep it a leader in online groceries, with a 60% market share alongside Walmart+ and Instacart.
- The online grocery market is projected to achieve a 10% CAGR from 2022 to 2026F, reaching a market size of US$200 billion in 2026F.
Lowering free delivery threshold from US$150 to US$100 for groceries. Amazon.com (AMZN) is reducing the amount that its Prime members need to spend on its Amazon Fresh grocery shopping service to get free shipping from US$150 to US$100 in the US. For Prime members, Fresh orders between US$50 and US$100 will incur a US$6.95 fee, while those under US$50 will have to pay US$9.95.
Despite still offering higher threshold compared to peers, we foresee this move should attract customers to buy more groceries online through AMZN. When compared to other players, the US$100 threshold is still significantly higher, as most competitors typically offer free delivery with a minimum spending of US$35 to US$50 (Figure 1). Nevertheless, driven by its brand power, convenience, and wide range of products and services, AMZN remains the main leader in online groceries, alongside Walmart+ and Instacart. Together, these three companies hold a combined 60% market share, according to Grocery Dive. We believe that despite the higher threshold compared to peers, it should encourage customers to spend more on groceries, thus protecting AMZN’s margins. It’s worth noting that the online grocery market size in the US was US$132 billion in 2022 and is expected to grow at a 10% CAGR to reach US$200 billion in 2026, according to eMarketer. It is estimated that AMZN’s online grocery sales accounted for approximately 10% of the company’s North America Retail segment in 2Q23, which would mean AMZN’s online grocery sales in 2Q23 were approximately US$7 billion.
Figure 1. Online free delivery threshold
| Online Groceries players | Threshold for free delivery (US$) | Remarks |
| Amazon | $100 | For Prime members |
| Walmart | $35 | For orders place through the Walmart+ app |
| Instacart | $35 | Depending on the retailer and the customer’s Instacart membership level |
| Target | $50 | Target circle members |
| Kroger | $35 | Kroger Boost members |
| Shipt | $35 | Varies depending on the retailer and the customer’s Shipt membership level. |
Source: Grocery Dive, DBS Bank