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An Amazon Fresh delivery worker makes a stop. Photo: Smith Collection/Gado/Getty Images

Amazon is losing billions of dollars as it expands free, fast shipping. Still, the company keeps doubling down and debuting two-hour grocery delivery at zero cost to Prime members in new markets.

The big picture: The American food market is worth a whopping $700 billion, but that's not why Amazon is chasing it. Consumers shop for food more frequently than anything else, and Amazon is betting that getting people to visit its site whenever they need groceries will turn them into loyal, lucrative customers.

"The path to the U.S. consumer's bank account is through their stomach," says Charlie O'Shea, a retail analyst at Moody's.

Driving the news: Amazon is slashing its monthly $14.99 fee for two-hour Amazon Fresh grocery delivery in 20 cities.

  • The retail giant already offers this delivery service to Prime members ordering from Whole Foods through Prime Now, but Amazon Fresh offers certain popular brands that Whole Foods doesn't, like Oreos and Cheetos.
  • Amazon's commitment to delivery isn't cheap — it spent $9 billion on shipping in just the third quarter. And with competitors like Walmart and Target focusing on delivery, Amazon has no choice but to keep spending, O'Shea says.

But, but, but: "I see Walmart's advantage in food similarly to the way I see Amazon's online retail advantage," he says. "The lead is too big."

  • The most important variable in food delivery is proximity to shoppers.
  • While Amazon has a number of warehouses for Amazon Fresh and 470 Whole Foods stores to serve as potential distribution centers, Walmart has 4,700 stores. Almost every American lives within 10 miles of a Walmart.

What to watch: Toppling Walmart is nearly impossible, but Amazon is in the best position to do it. It has a ton of cash to invest in the fight — and patient shareholders who are willing to let it spend big and worry about profits later.

Go deeper

2 mins ago - Technology

Facebook stock whipsaws amid ad targeting concerns

Photo Illustration by Igor Golovniov/SOPA Images/LightRocket via Getty Images

Facebook's stock showed volatility in after-hours trading Wednesday, despite adding users and beating on top and bottom lines.

Why it matters: Investors seem spooked by proposed changes to user data collection by Apple that would impact Facebook's ad business, in addition to perennial threats of new federal privacy regulations.

Fed chair says low interest rates aren't driving stock market prices

Jerome Powell. Photo: ANDREW CABALLERO-REYNOLDS / Getty Images

Federal Reserve chairman Jerome Powell told reporters on Wednesday that rock-bottom interest rates aren't playing a role in driving stock prices higher, while noting that vulnerabilities to the financial system are "moderate."

Why it matters: The statement comes amid unshakeable stock prices and a Reddit-fueled market frenzy — prompting widespread fears of a bubble and the role monetary policy has played in that.

2 hours ago - World

Biden freezes U.S. arms deals with Saudi Arabia and UAE

Trump struck several large arms deals with Mohammed bin Salman (L) and Saudi Arabia. Photo: Kevin Dietsch-Pool/Getty Images

The Biden administration has put on hold two big arms deals with Saudi Arabia and the United Arab Emirates which were approved in the final weeks of the Trump administration, a State Department official tells Axios.

Why it matters: The sales of F-35 jets and attack drones to the UAE and a large supply of munitions to Saudi Arabia will be paused pending a review. That signals a major policy shift from the Trump era, and may herald sharp tensions with both Gulf countries.

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