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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 hours ago - World

Biden seeks to reboot U.S. sanctions policy

Sanctions increased under Obama and dramatically under Trump. Photo: Tom Williams/CQ Roll Call

The Biden administration is rethinking the U.S. approach to sanctions after four years of Donald Trump imposing and escalating them.

The big picture: Sanctions are among the most powerful tools the U.S. has to influence its adversaries’ behavior without using force. But they frequently fail to bring down regimes or moderate their behavior, and they can increase the suffering of civilians and resentment of the U.S.

2 hours ago - World

Merkel's farewell spoiled by Poland crisis at EU summit

One last awkward EU "family photo." Photo: John Thys/AFP via Getty Images

Angela Merkel took up her vaunted mantle as Europe's crisis manager for what could be the last time tonight, as she urged the EU to find compromise in its showdown with Poland.

Why it matters: The European Commission has threatened to withhold over $40 billion in pandemic recovery funds after Poland's constitutional tribunal — stacked with loyalists from the ruling right-wing populist party — rejected the principle that EU law has primacy over national law.

Republicans who put it all on the line

Rep. Nancy Mace speaks with reporters after voting to hold Steve Bannon in contempt of Congress. Photo: Anna Moneymaker/Getty Images

A small contingent of House Republicans risked their political futures on Thursday, they say, in the name of constitutional responsibility.

Why it matters: The nine Republicans who voted to hold former Trump aide Steve Bannon in contempt of Congress are now in peril of becoming political pariahs. They've opened themselves up to potential primary challengers and public attacks from their party's kingmaker — former President Trump.

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