Now that Amazon has abolished its Amazon Fresh food delivery fee, delivery is clearly the most important competitive retail weapon for competitors racing to acquire and retain customers.

It’s a significant change, particularly for the bottom line, since the omnichannel leader previously charged $14.99 per month for the online service, which required a minimum order of $50 in New York City and $35 in Amazon’s other Fresh market regions.

The move comes as merchants, including Amazon competitors Walmart and Kroger, work hard to not just retain existing customers but also recruit new ones, even as Amazon develops its Whole Foods business, which it acquired for $13.7 billion in 2017.

Walmart charges an annual fee of $98 for food delivery and is extending its grocery pickup choices, including in-home and drop-off services. Kroger introduced a delivery service in certain regions little over a year ago, in addition to the third-party delivery it already offers. Kroger Ship, which ships directly to consumers, costs $4.99 for purchases under $35. Orders above that pricing point are free.

What Amazon’s Move Means

In unveiling the Fresh delivery fee approach, Amazon refers to food delivery as one of its “fastest growing businesses.” It is also growing its Amazon Go cashierless grocery stores, which now number 20, as well as establishing a new network of traditional food stores, as reported by the Wall Street Journal in March.

However, extending shipping is only one aspect of Amazon’s goal, as it explicitly said when announcing the move last week. Amazon’s Prime members get speed, or “ultrafast” delivery, as the company calls it.

“Prime members love the convenience of free grocery delivery on Amazon, which is why we’ve made Amazon Fresh a free benefit of Prime, saving customers $14.99 per month,” said Stephenie Landry, vice president of grocery delivery, in the blog release. “Grocery delivery is one of Amazon’s fastest-growing businesses, and we believe it will be one of the most popular Prime advantages.

“Amazon Fresh and Whole Foods Market provide fast and free grocery delivery, meeting both demands. We’ve also increased delivery speed with one- and two-hour choices in most Amazon Fresh markets, and we’ll keep increasing ultrafast speeds to all places where the service is offered.”

According to Paul Milner, marketing director at Displaydata, Amazon’s plan is not only a significant step forward, but it also positions Amazon as a serious competitor in the supermarket area.

“Grocery is undoubtedly going digital, but the store is still important, and Amazon understands that,” Milner told Retail Customer Experience in an email.

“While conventional grocers lack the foundation of e-commerce data that Amazon possesses, they do have one thing: experience. Grocers with competence in the field will have a competitive advantage against Amazon food stores. However, technological expenditures are required to improve the experience.

According to Milner, Amazon is also raising consumer expectations regarding the grocery store and delivery service, which are already high.

“As such, it’s necessary for grocers to take a leap and invest in digital-enhanced shops that offer efficient, engaging and consistent omnichannel experiences,” he stated.”

Patty McDonald, global solution marketing director at Symphony Retail AI, stated that while the Fresh delivery approach would bring in new consumers, Amazon must guarantee that it has the technology and capabilities to back up its ultrafast free delivery promise.

“Amazon must guarantee that it can handle demand predictions for its new offerings. Without the right technology, forecasting errors and delivery challenges can result in out-of-stocks and items that are about to expire by the time they reach a consumer,” she told Retail consumer Experience.

To meet the delivery promise, Amazon will need to understand consumer demand as well as external factors like weather in order to maximize demand forecasting and restocking, she added.

The same will be true for grocers competing with Amazon, McDonald said. To thrive, merchants, including Amazon, will need to improve efficiency in fundamental technologies like AI to guarantee they know where goods is in the supply chain, independent of channel.

“Competitors will need to improve their delivery game even if they do not offer free shipping. Traditional grocery shops can capitalize on their strengths to persuade people to utilize their services, whether through a regional assortment, fresh foods, faster delivery times, or in-store experiences, she added.