Amazon Expands Whole Foods’ Grocery Delivery

Retail e-commerce giant Amazon (AMZN) has expanded its online grocery delivery service from its Whole Foods stores to more cities across the United States. The service is now available in 48 cities including Milwaukee, Omaha, Detroit, Jacksonville, Madison, Orlando, St. Louis, Ann Arbor, Tampa, Tulsa, and areas around New York City and Seattle.

Amazon’s Prime members can order products from Whole Foods stores in any of these 48 cities and have them delivered to their homes through Amazon’s Prime Now service. Last month, the company launched a separate grocery pickup service. The company says this service will be rolled out in Fort Worth, Kennesaw, Richmond, Sacramento, and Virginia Beach, and will then be expanded to more cities.

Pick-up within an hour is free on orders of $35 or more, whereas customers will be charged $1.99 on orders of less than $35. To get delivery within 30 minutes, customers will be charged $4.99 with no minimum order. So, the pickup option looks less costly than delivery and may save both customers and Amazon money.

Since the acquisition of Whole Foods in August last year, Amazon has been offering its customers lower prices and exclusive deals on Whole Foods Market’s natural and organic foods. Customers have also saved millions of dollars from shopping on Prime Now.

While customers are getting cost benefits, Amazon’s expenses are increasing on the back of rising shipping costs. Amazon’s shipping costs totaled $6.0 billion, up 31.0% from a year earlier, which pushed up Amazon’s operating expenses by 33.8% YoY (year-over-year) to $49.9 billion in the second quarter of 2018.

In comparison, operating expenses increased 14.3% for eBay (EBAY) in that period. Costco (COST) and Target (TGT) saw their operating expenses rise 12.2% and 4.5% YoY, respectively, in their most recent quarters, which ended in May and April, respectively.