Amazon has continued its efforts to become a grocery store with the announcement of Amazon Prime Pantry, a service that allows Amazon Prime customers to pay just $6 for the shipping of up to 45 pounds of dry goods like cereal and crackers, or common household items like laundry detergent, cat litter, and body wash.
The service differs from Amazon’s other grocery-related initiatives in two ways: first, it doesn’t allow Amazon customers to purchase meat, produce, or other items that require refrigeration; second, it’s available in the continental United States instead of just Seattle and the Bay Area.
This makes it the easiest grocery service for Amazon to implement on a large scale. The others require that the company add refrigeration to its warehouses and delivery trucks — all this one needs is a delivery truck and sturdier boxes. Moving into your fridge is hard; moving into your pantry, bathroom, and laundry room is proving to be much easier, at least in the short-term.
But this service makes Amazon even more dependent on UPS, and it’s hard to tell how it plans to move beyond that reliance. Amazon isn’t keen on building services on top of other platforms — that’s why it built Amazon Web Services, which lets it run its website and streaming services without having to rely on another delivery network (while making the company some money, too).
The physical equivalent to building Amazon Web Services would be creating its own delivery infrastructure. It relies on as few companies as possible to deliver its bits and bytes to all of its customers; why should it continue to rely on UPS as it tries to deliver its boxes and packages?
Amazon knows that selling groceries could allow it to build customer loyalty at a time when it needs it more than ever. This is the company’s first attempt to do that at a large scale, but it’s also the easiest service to implement, because it doesn’t require the company to solve its fridge problem and develop its own delivery infrastructure, like Amazon Fresh and Amazon Dash do.
Reactions from around the Web
GeekWire notes that Amazon Prime Pantry could help Amazon Fresh when it expands:
The Seattle-based retailer is clearly hoping that Amazon Prime users will be willing to shell out a little extra cash for the convenience of having household delivered to their door, but that may be a tall order for customers who are already seeing the price of Prime go up by $20, from $79/year to $99/year.
But if Amazon can train customers to start buying household goods through Prime Pantry, they may be more likely to spring for Amazon Fresh when that grocery service expands.
Engadget considers the service a move against bulk retailers:
Amazon’s dead-set on killing off the grocery store, with a same-day delivery service and even a Dash gadget for restocking items around the house. Now the retailer’s going one step further, taking on Costco and Walmart with a new program called Prime Pantry. If you’re a Prime member living in the 48 contiguous states, you can ship 45 pounds’ worth of household essentials — in “everyday sizes,” not in bulk — for a flat fee of $6. (Yes, that’s on top of your Prime membership payment.) Amazon told us the items available include ‘popular soft drinks and bottled water, a new range of paper and laundry products in popular pack sizes, single boxes of breakfast cereal, potato chips, convenience-sized personal care products and more.’ Rumors about an Amazon Pantry service began circling late last year, and while the service is live now, the company hasn’t formally announced it.
Re/code doesn’t understand what Amazon Prime customers are getting from the service:
The problem is that Amazon doesn’t spell out just how much of a deal these Pantry items are.
Maybe it won’t matter. Maybe Prime customers so love Amazon that they will see value in getting a shipment of Doritos, deodorant, toilet paper and cereal delivered to their door in one tidy box.
Or maybe the digital coupons displayed next to many of the items will give the impression that Pantry items are cheaper on Amazon than they are anywhere else.
Pando weighs in
Pando contributor Kevin Kelleher explained Amazon’s loyalty problem:
So it’s not so much that Amazon’s revenue growth is slowing, it’s why. If it’s something Prime can reverse, Amazon’s future looks bright. If not, it will mean customer loyalty may be too slippery a thing even for Amazon to grasp for long. The quest for the best deal may be more powerful than Amazon realizes. So Amazon spends and spends, but it’s not enough to keep enough shoppers coming back.
Buying a costumer for life, if it can be done at all, is an expensive proposition. Maybe too expensive even for Amazon to afford.
I wrote about the increasing importance of groceries to Amazon after Jeff Bezos mentioned Amazon Fresh, perhaps for the first time, in a shareholder letter earlier this year:
The mention of Amazon Fresh in yesterday’s shareholder letter appears to be the first public mention of the service Bezos has made in some time. Its expansion to Los Angeles after five years in Seattle, and its continued expansion to San Francisco just six months later, suggest that Amazon Fresh is getting closer to a wider release. And the debut of Amazon Dash, the first Amazon product that focuses on physical goods instead of entertainment services, makes it seem like Amazon is devoting more resources to groceries than most people might think.
Marketplaces started as a place where people could buy all the food they need. Then they became sprawling shopping malls where people could purchase all kinds of other goods. Amazon has taken the different approach: after spending a few decades selling knick-knacks and entertainment, it’s ready to focus on the essentials.