Amazon Lowers Prices on Its Grocery-Delivery Service for Some Prime Members

NEW YORK (TheStreet) -- Amazon (AMZN) is always adding perks to its Prime membership, and this week's addition includes cheaper grocery delivery for some Prime members.

On Tuesday, Amazon quietly changed its pricing structure for some customers of AmazonFresh, the service that delivers fresh groceries within 48 hours. Until now, all consumers had to pay a flat $299 annual fee to use AmazonFresh, but now Prime members who live in certain ZIP codes in California can avoid the annual fee and instead pay $7.99 per delivery on top of the $99 Prime membership fee. Whether the consumer pays the annual or per delivery fee, the order qualifies only if it is above $50.

On Amazon's site, the company encourages consumers who plan to use the service twice or more a month to opt into the $299 annual fee structure. If consumers were to order from AmazonFresh just twice a month, however, the $7.99 per delivery arrangement would end up costing only about $192 per year, which is $100 cheaper than the annual fee.

And even if consumers plan to use AmazonFresh more than twice a month, the $7.99 fee could be more attractive to those who may not want to front the full $299 at the beginning of the year. So the new delivery option could be a way to ease consumers into the program, in hopes of eventually converting them to loyal users. The new fee structure could also help Amazon compete with other delivery services such as Postmates and Instacart, which offer per-delivery pricing structures.

AmazonFresh is available in certain markets in New York, Philadelphia, Seattle and California. In some areas, Prime members can try AmazonFresh for free until September, when they will then be asked to pay the $299 fee to continue. Only California-area Prime members seem to be seeing the new $7.99 per delivery fee, though.

Yet again, Amazon is showing its devotion to Prime, figuring out new ways to sweeten the deal and offer more perks to those who subscribe. While Amazon itself doesn't disclose how valuable Prime members are to its business, numerous studies and reports show how advantageous Prime members are.

ITG analyst Steve Weinstein estimated that Prime members spend $1,000 more a year on average compared with non-Prime members. And less than 1% of Prime members are likely to consider other online retailers during the same session, according to research firm Millward Brown Digital. For example, a non-Prime member is eight times more likely than a Prime member to cross-shop between Amazon and Target (TGT) during the same session.

The more benefits Amazon can add to Prime, the more Prime members it can attract, and the more valuable its customer base becomes.

Amazon did not respond to requests for comment for this story. 

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