Here’s what Amazon is doing to increase capacity for surging online grocery demand orders

(GeekWire Photo / Taylor Soper)

Amazon is putting new online grocery customers on a waitlist and is reducing hours at some physical Whole Foods stores to help workers fulfill more online orders as it adjusts to increased demand amid the COVID-19 crisis.

More people are ordering groceries online due to the novel coronavirus outbreak, causing some customers to report extended delays or no open delivery windows for weeks.

Amazon said in a blog post that it increased online grocery order capacity by 60% but still expects delivery delays. The company said Sunday it is temporarily asking new customers to sign up for an invitation. It is also rolling out a new feature to give delivery customers a virtual “place in line” that will ” allow us to distribute the delivery windows on a first come, first served basis,” said Stephanie Landry, Amazon’s vice president of grocery.

At its Whole Foods locations, Amazon is adjusting store hours to create exclusive time for online groceries, and is turning its new grocery store concept in Los Angeles into a temporary online order warehouse.

The company also expanded grocery pickup (buy online, pick up at store) from 80 to more than 150 Whole Foods locations.

“Finally, our Whole Foods Markets stores remain open and Team Members have done incredible work ensuring a safe and well-stocked shopping experience,” Landry wrote. “If you are able to do so safely, we kindly encourage our customers who can to shop in-person.”

That encouragement is worth noting given that some health officials have advised avoiding the grocery store. “This is the moment to not be going to the grocery store, not be going to the pharmacy, but doing everything you can to keep your family and your friends safe,” Dr. Deborah Birx, coordinator for the White House Coronavirus Task Force, said on April 4.

An analysis from RBC Capital Markets last week concluded that the COVID-19 crisis will lead to a permanent consumer purchasing shift with online groceries, and that Amazon’s online grocery arm could produce $70 billion in gross merchandise volume by 2023, up more than 3X from 2019.

The spike in online grocery purchasing could also help Amazon boost its Prime membership base. Amazon requires a $119/year Prime membership to access its 2-hour Prime Now delivery service and Amazon Fresh.

Groceries are an estimated $678 billion U.S. market that is increasingly going digital. Research firm eMarketer estimates that U.S. food and beverage e-commerce sales will grow 23.4 percent to more than $32 billion this year, making it “both the fastest-growing and least penetrated ecommerce category.” Those projections came before the COVID-19 crisis.

“Aside from the many brick-and-mortar retailers watching foot traffic and sales drop to near zero, the most profound shift in consumer behavior is happening in grocery ecommerce—and this shift is likely to have one of the longest-lasting consequences,” eMarketer wrote.

Instacart and Walmart are also seeing increased online grocery demand. Instacart is hiring 300,000 shoppers over the next three months to keep up.

Amazon said Monday it added 100,000 new warehouse workers over the past month to help fulfill the surge in orders by customers sheltering at home. The company is now hiring an additional 75,000 employees.