Amazon (AMZN -1.64%) stock could finally get the lift it deserves if the company's expanding grocery business is a hit. However, Amazon will need more than fresh produce to grab a meaningful share of the $568 billion U.S. grocery market. Fortunately for Amazon shareholders, where success in groceries is concerned, the e-tailer isn't leaving a lot to chance.
That's where Amazon Prime Fresh comes into the mix. In an apparent bid to replicate the success of its original Prime shipping program, Amazon recently announced a new version of the service called: Prime Fresh. As a regular Prime member, I get unlimited two-day shipping from Amazon.com for just such $79 a year. However, Prime Fresh now offers customers unlimited same-day and next-day shipping on more than 500,000 products and groceries for $299 per year.
So what?
This new offering is exciting for a few reasons. First, Amazon already has the logistics and infrastructure in place to easily pull off same-day delivery, whereas grocery retailers like Whole Foods (WFM) lack the resources necessary to offer grocery delivery at Amazon's scale. This could be a problem for Whole Foods down the road if Amazon Fresh expands nationally, particularly since Amazon Fresh offers a wide selection of organic and locally sourced produce.
Amazon's Prime Fresh could also be a catalyst for the stock if enough customers opt into the program. Consider this, "Prime customers spend more than twice as much annually on Amazon than non-Prime customers," according to Wired.
This should play out even better for Amazon, thanks to its new annual membership fee. Think about it: Customers who pay the $299 for Prime Fresh are going to make sure they get their money's worth in same-day and next-day shipping -- and how do they do that? By ordering more frequently from Amazon.com. Looking ahead, I suspect Amazon's Prime services will play a key role in the future success of Amazon stock.
Should you be a buyer?
