Google will soon start offering same-day grocery delivery in San Francisco and Los Angeles, according to the search giant. The service is part of the company’s on-demand delivery service, Google Express, which already delivers dry foods and other merchandise to customers.
The news, which was announced Wednesday, doesn’t come as much of a surprise as rumors had been swirling that Google (GOOG) has plans to expand its territory into perishables and fresh foods, including vegetables, fruits, dairy, and meat products. This new offering places Google as a competitor to Amazon’s (AMZN) grocery delivery service Amazon Fresh, as well as Canadian supermarket chain Safeway, Silicon Valley upstart Instacart, and New York’s FreshDirect.
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Google will offer fresh food delivery from Whole Foods, and other partners in select neighborhoods in San Francisco and Los Angeles, the company said Wednesday. For Google Express members, grocery delivery must meet a minimum of $35 per order and fees will start at $2.99 per order. Memberships cost $95 per year. For non-Google Express members, orders start at $4.99, depending on how fast items will be delivered.
Instacart’s fees start at $5.99 per delivery for non-members. Consumers can pay $149 per year to become a member, and access free two-hour and scheduled deliveries for orders above $35. In contrast, Amazon Fresh costs users $299 per year.
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Why are technology giants like Amazon and Google getting into groceries? Online grocery shopping is a nearly $11 billion business in the U.S. With 9.6% annual expected growth. But profit margins are traditionally low in the industry.
But both technology giants see opportunity in catering to the on-demand world in cities, where consumers are increasingly expecting (and paying for) services to deliver items within a matter of hours. According to the Wall Street Journal, Google is keeping its costs down by making deliveries from its grocery partners, instead of holding inventory in costly warehouses.