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June 11, 2013

Amazon Offers California Consumers New Grocery Service, AmazonFresh

By Monica Gleberman, Contributing Writer

Retailers continue to create gimmicks and selling points to keep their customers happy and coming back to purchase more items. Barnes & Noble offers a membership plan that costs readers $40 per year and gives them access to free shipping, discounts on purchases, and 10 percent off books in the store. To compete, Amazon created its own program called Amazon Prime.

Originally, the program was limited to just products. For $79 per year, users would get access to free two-day shipping of any product they purchased online. Now, the retailer is expanding (at least in Los Angeles) to offer AmazonFresh, a service that allows users to shop and get groceries delivered right to their front door.

Like with Prime, Los Angeles residents have the ability to sign up for AmazonFresh for a free 90-day trial. Once the trial is completed, if not cancelled, customers will be charged $299 per year, giving them access to free same-day or overnight delivery of groceries that total $35 or more.

“It’s a whole new level of Prime and potentially a new level of customer loyalty to Amazon,” said Anne Zybowski, vice president of retail insights at Kantar Retail.

$299 annually might seem like a hefty price to pay to get groceries delivered, but analyst R. J. Hottovy said that when he looked at the numbers, customers who have memberships seem more willing to spend even more money through the retailer, not less. According to Hottovy, users who currently take advantage of Amazon’s Prime service are spending double the amount of those without it.

“The $299 price point is intriguing and could help to not only drive greater shopping frequency and increase the amount spend on Amazon per member, but also shopping across a wider range of Amazon departments,” said Hottovy.

Amazon plans to continue testing it’s new Fresh service and hopes to launch the same service later this year in the San Francisco Bay area. If successful, the online retailer plans to offer the service throughout the United States.

Edited by Alisen Downey
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