Amazon takes on supermarkets with free food delivery
Amazon is increasing its online shopping service with the goal of serving millions of shoppers across the UK by the end of 2020.
Online food sales almost doubled during the pandemic with groceries struggling to keep up with demand.
Amazon is now looking for a larger slice of this fast-growing market, which analysts say could increase pressure on rivals like Ocado.
“It’s extremely significant,” says retail analyst Richard Hyman.
“[Amazon] it can be exciting, disruptive and it’s a business with gigantic ambitions. “
Amazon Fresh offers same-day or next-day grocery deliveries to customers in London and home counties.
Buyers need to subscribe to Amazon Prime to get it, and users currently have to pay an additional monthly cost or delivery cost per order. It has around 10,000 products including fresh, chilled and frozen foods.
As of Tuesday, this service will now be a free benefit for subscribers in these areas for orders over £ 40.
About 40 postal codes in Surrey will also have access to a faster offer, with possible same-day delivery by midnight if you order by 9:00 pm.
Amazon says it will distribute this faster and unlimited free grocery service to “more cities” later this year. It is an ambitious move.
‘Big step forward’
“Grocery delivery is one of the fastest growing companies on Amazon and we believe this will be one of the UK’s most loved Prime benefits,” says Russell Jones, country manager of Amazon Fresh UK.
He says this expansion was on the cards before Covid-19.
“We’ve been planning it for a long time. It’s a big step forward in the volume. At the beginning of the block, all our ability was being exploited. We are confident that we can launch this service right now,” he says.
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Amazon has revealed some details about its plans.
It launched Amazon Fresh in the UK in 2016 and has never provided sales numbers or customer numbers. It hasn’t even confirmed how many Amazon Prime members it has in the UK.
According to market research firm Mintel, there are 15 million subscribers, which potentially offer Amazon a huge platform.
“I think they’ll be a big player in online food retail. Otherwise they wouldn’t. Most of the markets they go to want to be the biggest,” says Richard Hyman.
It is also much more difficult for grocers to make a profit from online sales than customers who visit stores.
“The scary thing for everyone else is that everyone really needs to make money, while Amazon doesn’t and it puts them in a huge advantage.”
But it won’t be easy, says GlobalData retail analyst Thomas Brereton.
“At the moment, people don’t really consider Amazon as food. They have to create brand awareness and this takes time and a lot of investment.”
“Retailing food and non-food is two very different concepts and Amazon must be careful not to underestimate the competitiveness of the British food market.”
He adds: “Also, because of what’s happening with the economy, value will be the main driver, which is something Tesco has tried to do with Aldi and its price matching campaign. Amazon’s goal will be rather premium as he did he signed many agreements with smaller and independent suppliers “.
A big battle for exclusive buyers is scheduled for autumn. In September, Ocado will begin selling M&S products instead of Waitrose foods. And it’s these players, Richard Hyman thinks, who need to worry the most when it comes to Amazon’s latest move.
“If you think of Prime’s demographics, these members are relatively better … It is one thing to fight Amazon when you have a consolidated business, but to fight them when you have something completely new in the case of M&S and relatively new in the case of just the flying solo of Waitrose will be more demanding.
“Amazon is very smart about getting the rest of the market on its agenda and I think what they are going to do in particular is increase the forecast on delivery times,” he says.
All established players quickly developed online skills to meet growing demand, which many believe will be a permanent change in buying behavior. Amazon’s expansion means that this £ 119 billion part of the food market will become even more competitive in the coming months.