AmazonFresh grocery delivery service expands into its third US city

The online retailer said it is expanding its AmazonFresh service into its third city after testing it in Los Angeles and Seattle. The service provides same-day and early-morning delivery of more than 500,000 Amazon products including fresh groceries and local items.

Competition in the online grocery delivery space has been growing. Other competitors include FreshDirect, Instacart, Peapod and Safeway, which have been tending to customers who want to avoid the supermarket. Wal-Mart Stores Inc. has been testing its service, Walmart To Go, in San Francisco since 2011. Outside of groceries, eBay Inc.'s eBay Now service has been delivering items from local stores to customers in about one hour. Available in New York, Chicago and Dallas, eBay Now delivers everything from iPads to towels to tools.

AmazonFresh goes beyond groceries too. Customers can also order products including electronics, diapers and ready-to-heat meals from local restaurants.

Shipping is free for orders over $35, but AmazonFresh users in San Francisco and Los Angeles have to pay $299 a year for the service. That comes with a subscription to Amazon Prime, a $79-per-year service that includes free two-day shipping on many Amazon items and access to the company's video streaming selection. Amazon said it will give customers in San Francisco a free 30-day trial.

(Also see: Amazon targets frequent shoppers with new Prime service)

Pricing in Seattle is different. Customers there generally pay for each delivery, but are able to qualify for free delivery if they order frequently over the course of a month or spend over a certain limit.

AmazonFresh was launched in Seattle, where Amazon is based, in 2007. It came to Los Angeles in June.

(Also see: Amazon plans big expansion of online grocery business - sources)

The company is evaluating whether it will expand into other markets. "We recognize the economics are challenging," said spokesman Scott Stanzel, "so we will remain thoughtful and methodical in our approach to expanding the service."