Amazon’s Whole Foods Tacks on Delivery Fee in Some U.S. Cities

(Bloomberg) -- Amazon.com Inc. is tacking on a delivery fee for Prime members who shop at Whole Foods Market in several U.S. cities, an indication that the economics of grocery delivery continue to pose a challenge for even the world’s largest online retailer.

Shoppers were informed of a $9.95 service fee for deliveries beginning Aug. 30 in the Boston and Chicago areas, as well as Manchester, New Hampshire, Portland, Maine, and Providence, Rhode Island.

Amazon bought the organic grocer for $13.7 billion in 2017 and quickly rolled out delivery from Whole Foods stores, a perk offered for free for Prime members whose orders exceeded $35. As that rollout was going on, Amazon also dropped a $14.99-a-month charge for delivery from its existing Amazon Fresh grocery business, essentially making free food delivery a standard perk for paying Prime members. The fast-shipping and video streaming club costs $119 a year in the U.S.

“This service fee helps to cover operating costs, so we can continue to offer the same competitive everyday prices in-store and online at Whole Foods Market,” the company said in a notice sent to some shoppers last week. Grocery pickup remains free, the notice said.

A Whole Foods spokesperson described the new delivery fee in some markets as a pilot program, saying the company preferred use the charge to help cover the costs of equipment, technology and delivery rather than raising food prices.

Whole Foods delivered more than three times as many orders in in 2020 as in 2019, the spokesperson said, as shoppers avoided stores during the pandemic, and average basket sizes are up since the beginning of the year. The chain struggled during lockdowns with a steep decline in visits for prepared foods, a staple of Whole Foods stores in urban areas.

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