Dive Brief:

• Amazon Fresh is significantly raising the threshold its Prime customers will need to meet in order to receive free grocery delivery, according to an email sent to members of its Prime service. 
• Beginning Feb. 28, orders under $50 will incur a $9.95 fee; orders between $50 and $100 will incur a $6.95 fee; and orders between $100 and $150 will include a $3.95 fee. Only orders above $150 will not come with a fee. 
• This change, which follows the company’s decision in 2021 to raise fees for Whole Foods Market orders, comes as Amazon tries to improve online grocery profitability and contends with the recent slowdown in e-commerce growth.

Dive Insight:

With this update, which applies to orders from both Amazon Fresh stores as well as its online-only service, Amazon is more than quadrupling the amount Prime shoppers must spend on a grocery order in order to get free delivery. Previously, the company waived delivery fees on orders over $35.

The move echoes past steps Amazon has taken to address profitability across its budding grocery properties. In late 2021, Whole Foods caused a stir when it tacked on a $9.95 service fee for delivery orders after previously offering the service for free on orders over $35. Earlier that year, Amazon shuttered its Amazon Pantry stock-up grocery service.

Moreover, the news highlights the harsh economic realities of offering online grocery service as costs mount and sales growth slows amid ongoing inflation.

“We’re introducing a service fee on some Amazon Fresh delivery orders to help keep prices low in our online and physical grocery stores as we better cover grocery delivery costs and continue to enable offering a consistent, fast, and high-quality delivery experience,” an Amazon spokesperson said in an email. “We will continue to offer convenient two-hour delivery windows for all orders, and customers in some areas will be able to select a longer delivery window for a reduced fee.”

Amazon Fresh will continue to offer free one-hour pickup service for Prime members, according to the brand’s website, which also lists the new delivery fee structure.

Amazon Fresh has been delivering groceries since 2007, and nowadays also incorporates a fleet of more than 40 stores. The rollout of Amazon Fresh stores appears to be paused, however, with The Information reporting last month the company has not opened a new location since September. A company spokesperson previously declined to comment on the development when reached by sister publication Grocery Dive.