Amazon's Grocery Expansion: A Threat to Traditional Retailers?

Amazon plans to expand its grocery-delivery business, potentially disrupting the grocery market. Shares of grocery companies fell in response, with Instacart-owner Maplebear down 12%, DoorDash down 3.8%, and Kroger down 4.4%. Amazon's expansion aims to boost growth in a retail arena where it doesn't yet have a dominant position.

Amazon has announced a significant expansion of its grocery delivery service, which could disrupt the grocery market and boost its growth in an arena where it is not yet dominant. The company plans to offer same-day delivery of fresh food items, including dairy, meat, and seafood, to more than 1,000 cities across the United States [1].

This expansion comes after years of trial and error by Amazon in the grocery sector, including partnerships with local grocery stores and attempts to operate separate apps for grocery delivery. However, the new service allows customers to order perishable food items alongside their typical Amazon orders and receive them on the same day [1].

The service will be free for Prime members on orders over $25 in most cities, or will have a $2.99 fee if the order doesn't meet that minimum. Non-Prime customers can use the service for a $12.99 fee without an order minimum. Availability will expand to 2,300 cities by the end of 2025 and to additional places in 2026 [1].

Analysts see this expansion as a game-changer in the $90 billion online grocery market opportunity. Amazon's move is expected to boost shopping frequency, improve customer retention, and compete more effectively with Walmart and Target [2].

Amazon's grocery ecosystem now spans four major banners: Amazon Fresh, Whole Foods Market, Amazon Go, and Amazon Grocery. The company is also redesigning Amazon Fresh stores with expanded selections in dairy, snacks, and international foods. Over 90% of surveyed customers reported being "very satisfied" with the refreshed experience [3].

The expansion reflects Amazon's broader strategy to unify convenience, affordability, and personalization. Prime members can expect AI-powered grocery recommendations based on purchase history and dietary preferences, making the shopping experience smarter and faster [3].

This move has led to a reaction in the market, with shares of grocery companies falling in response. Instacart-owner Maplebear, DoorDash, and Kroger all saw significant drops in their stock prices following the announcement [2].

Amazon's grocery delivery expansion marks a strategic leap in its effort to dominate the online grocery space. With over $100 billion in gross grocery sales in 2024, Amazon has become one of the largest grocers in the U.S., even excluding Whole Foods Market and Amazon Fresh [3].

References:
[1] https://www.cnn.com/2025/08/13/food/amazon-grocery-delivery-expansion
[2] https://www.benzinga.com/analyst-stock-ratings/reiteration/25/08/47130312/amazons-grocery-delivery-expansion-seen-as-game-changer-in-90-billion-online-market-opportunity
[3] https://panasiabiz.com/111038/amazon-expands-grocery-delivery-for-prime-members/