Dallas and Austin are among the first four U.S. cities where Amazon's Prime Now grocery service will fill orders from Whole Foods' shelves and refrigerated cases.

It's the next step as Amazon begins to clarify how its $13.7 billion purchase of Whole Foods Market last year fits into its strategy as it goes up against Walmart in the competitive grocery space.

On Thursday, the e-commerce giant will begin filling its first online orders from the Austin-based grocer's stores.

Thursday is "Day 1 and we're excited to get started," Simoina Vasen, director of Prime Now, said in an interview Wednesday. "We're ready."

Vasen was channeling Amazon founder and CEO Jeff Bezos whose mantra is that Amazon is always "in Day 1."

The other two cities where the service will debut are Cincinnati and Virginia Beach, Va.

The service will be free for Prime Now members, who are guaranteed delivery in two hours. The added fee for one-hour delivery is $7.99. All grocery prices will be the same as in stores, including promotional prices, Vasen said. Once the groceries are picked and packed, Amazon Flex independent contractor drivers will make the deliveries. Customers will be able to track their orders in real time from the Prime Now app or from text message alerts.

"We've been in Dallas with Prime Now for a while now, and we know our Prime Now customers in Dallas love the convenience," Vasen said. "Now, they can use it to get their weekly shopping done too."

Tight market

Picking Dallas as a starting point, Amazon is going up against its largest competitors in the grocery business, including Walmart, the largest U.S. grocer, and Kroger, the largest traditional supermarket chain. In the last couple of years, both Walmart and Kroger have built large online grocery businesses in North Texas with their curbside pick-up options. Walmart has said that Dallas-Fort Worth is its largest online grocery market.

The attention from Amazon, which is in the midst of a search for a $5 billion second headquarters, comes as both Austin and Dallas are among 20 cities vying for its HQ2.

Whole Foods operates 457 stores in the U.S. and Amazon plans to add more of its stores to the Prime Now grocery service this year, Vasen said. Starting out with Austin and Dallas made sense, she said, also because "Whole Foods is a beloved brand in Texas."

Using Whole Foods stores to fill orders for fresh groceries is the big step that the grocery industry has been anticipating.

The prospect has sent competitors off on a flurry of acquisitions and partnerships.

Target purchased Instacart's rival Shipt for $550 million. Albertsons bought meal kit service Plated for $200 million. Last week, Kroger sold its convenience store chain for $2.15 billion, raising money it can now spend on technology and on its supermarkets.

In D-FW, every local grocer has made its stores shoppable online. Aldi, Albertsons, Costco, Tom Thumb, Market Street and Kroger all have grocery pickup or delivery options. Instacart, Shipt and Google Express are also operating in D-FW. Target and Shipt are starting their same-day delivery service in D-FW, Austin and other Texas cities starting Feb. 15.

1 / 3Beginning Thursday, shoppers in Dallas, Austin, Cincinnati and Virginia Beach, Va., will be able to get fresh groceries from Whole Foods delivered by Amazon Prime Now.(Rose Baca / Staff Photographer) 2 / 3All grocery prices will be the same as in stores, including promotional prices, says Simoina Vasen, director of Prime Now.(Maria Halkias / Staff ) 3 / 3Whole Foods has 14 stores in the Dallas-Fort Worth market, but not all of them will be drafted as mini fulfillment centers. Simoina Vasen, director of Prime Now, wouldn't say which local stores are involved.(David Woo / Staff Photographer)

And Amazon has been here too, filing orders for dry grocery and other household products and then adding fresh groceries in mid-2016 through a partnership with Sprouts Farmers Market.

Dallas was one of the first five cities in early 2015 to get the Prime Now service, which was a step up from its same-day services launched the prior year.

More options

While it begins to use Whole Foods stores to scale the grocery business, Amazon will continue to offer groceries through its other methods, Vasen said, including its partnership with Sprouts in Dallas. "We've created a variety of services and now we're adding Prime Now."

Last year, Amazon sold $2 billion in grocery products online, according to One Click Retail, an e-commerce sales analytics firm. That represented an 18 percent online grocery market share for Amazon. It was more than any other U.S. grocer and double the second place share held by Walmart. But that's a tiny slice of the $800 billion U.S. grocery market, where Walmart leads with a 15 percent market share.

Since Amazon completed the acquisition of Whole Foods in August, the organic grocery chain's private label products, such as 365 Everyday Value and Whole Paws, have been available through Amazon.com, AmazonFresh, Prime Pantry and Prime Now. The 365 Everyday brand consistently sold as the No. 2 bestselling brand among Amazon's private labels -- second only to AmazonBasics, according to One Click Retail.

In Dallas, Prime Now grocery service will be available in select neighborhoods. Whole Foods has 14 stores in the Dallas-Fort Worth market, but not all of them are being drafted as mini fulfillment centers. Vasen wouldn't say which local stores are involved, but said each participating store will be extending deliveries as far as possible. Some select beer brands are included in the service, but wine is not.

Customers can find out if groceries from Whole Foods are available in their areas by entering a Zip Code in the Prime Now website or app.

Twitter: @MariaHalkias