Amazon’s Shares Gain as Firm Expands its Same-Day Grocery Delivery Service

Amazon.com Inc. (NASDAQ: AMZN) shares rose 2.04% to $229.12 on Wednesday as the e-commerce giant announced a major expansion of its same-day grocery delivery service to compete more aggressively with Walmart+ and Instacart.

The tech company launched the service in over 1,000 U.S. cities and plans to more than double its reach to 2,300 locations by year-end. The move represents Amazon’s latest effort to capture market share in the grocery delivery sector, where it has yet to establish the dominant position it holds in other retail categories.

Amazon’s Aggressive Expansion Strategy Targets Key Markets

Amazon’s same-day delivery service is now available in major cities including Phoenix, Raleigh, North Carolina, and Tampa, Florida, with the company investing $4 billion to bring enhanced delivery services to more than 4,000 rural U.S. communities. The service is free for Prime members on orders over $25, while non-Prime customers pay a $12.99 fee regardless of order size. This pricing strategy directly challenges Walmart+, which costs $98 annually and offers same-day delivery in under three hours, with some orders arriving in as little as 30 minutes.

Previously, Prime subscribers had to pay an additional $9.99 monthly fee to receive free grocery deliveries through Amazon Fresh or Whole Foods Market on orders over $35. The elimination of this fee and reduction of the minimum order threshold to $25 represents a significant strategic shift aimed at driving customer adoption. EMarketer analyst Blake Droesch noted that this expansion “marks a major expansion for Amazon’s digital grocery service, largely because it’s being offered to its massive Prime member base at no additional cost.”

The announcement had immediate market impact, with Amazon shares gaining 1.4% on Wednesday afternoon while competitors suffered losses. Instacart (CART.O) shares plummeted 12.4%, DoorDash declined 4.8%, and Kroger dropped 4.2%, highlighting investor concerns about intensifying competition in the grocery delivery space.

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Amazon’s Strategic Push into New Market Intrigues Investors

Amazon’s grocery delivery expansion represents a strategic push into one of the few retail sectors where the company lacks market dominance. UBS analyst Stephen Ju indicated the move “decreases the barrier to entry for Prime and non-Prime users to buy groceries from Amazon and will likely pressure Uber Eats and DoorDash’s margins.” The service allows customers to order perishable items like strawberries, milk, and frozen dinners alongside electronics in a single cart, leveraging Amazon’s existing logistics network.

The expansion comes as Amazon faces challenges in international markets, particularly in the UK where a study by the British grocery regulator found issues with supplier relationships. However, the domestic focus on grocery delivery aligns with broader industry trends, as Walmart recently announced plans to offer three-hour delivery to 95% of the U.S. population.

Moody’s Ratings vice president Chedly Louis warned that Amazon’s acceleration into perishable food delivery could strain small, independent grocers across the country.

With a current market capitalization of $2.444 trillion and trading at $229.18, Amazon continues to demonstrate its ability to disrupt traditional retail categories through strategic investments and competitive pricing.

The company’s willingness to sacrifice short-term profitability in grocery delivery to gain market share reflects its long-term vision of comprehensive retail dominance across all consumer categories.

Disclaimer: The author does not hold or have a position in any securities discussed in the article. All stock prices were quoted at the time of writing.