Whole Foods Adds $10 Fee to Amazon Prime Members’ Deliveries

In a nod to rising last mile costs, Whole Foods is ending free delivery for Amazon Prime members on Oct. 25, 2021. Orders placed through Amazon Prime will include a $9.95 delivery charge designed to help cover operating costs, a Whole Foods spokesperson told CNN Business.

Whole Foods delivered three times as many orders in 2020 as it did in 2019, causing the costs associated with equipment and technology to rise. The retailer instated the delivery fees to avoid raising prices of the groceries themselves, starting with pilots in six markets during the summer of 2021: Portland, Maine; Providence, R.I.; Manchester, N.H.; and the Detroit, Boston and Chicago metro areas.

Amazon acquired Whole Foods in 2017 and introduced a free two-hour delivery option in 2018 as it steadily expanded the grocer’s delivery footprint. However, grocery margins are tight, and retailers are limited in how many costs they can pass along to consumers: prices rose 3.7% over the past year, according to the Bureau of Labor Statistic’s Consumer Price Index. Digital grocery prices in particular are up 1.64%, according to the Adobe Digital Economy Index.

Rising internal costs are no surprise given the current labor shortage and shoppers’ rising expectations. In response, 81% of retailers are planning to increase investment in more complex last-mile initiatives over the coming year, according to Convey. It’s no surprise that Amazon is boosting its own last mile investments in order to remain at the cutting edge of delivery.

However, speed isn’t everything, and the addition of a fee could impact the number of Prime shoppers who choose Whole Foods delivery. “I think the important thing here is that there’s a big difference between the speeds that retailers make available and the speeds that consumers choose,” said Tom Enright, Vice President in the Gartner Supply Chain practice in an interview with Retail TouchPoints. “For many years now we’ve seen, in whatever survey you look at, north of 70% of consumers say that they want to avoid shipping charges and take action to do so. That typically means that they’re going to be waiting three days or longer.”

Despite this cutback, Prime members still enjoy grocery perks. Whole Foods will still offer free one-hour grocery delivery, and the new fee won’t apply to orders placed through Amazon Fresh.