Amazon is now taking on the supermarkets and Ocado in the UK with free grocery deliveries from its Amazon Fresh service.
The Amazon Fresh grocery service enables Amazon Prime customers, firstly in London and parts of the Home Counties, then across the UK by the end of the year, to buy groceries online and have them delivered same or next-day for free (for orders over £40).
In Competition With Supermarkets and Ocado
This will put Amazon in direct competition with the major supermarkets, who offer their own delivery service, and with companies like Ocado which has no physical stores but has warehouses (like Amazon) and operates a grocery delivery service. Ocado, which now has a 50/50 partnership with Marks and Spencer is the fastest-growing grocer in the UK.
Amazon Fresh may be a new relatively new idea across the UK, but not in London. Amazon launched Fresh in the UK (London) back in 2016 and it is something that Amazon was also developing in its U.S. home market back in 2017. In May 2017, for example, Amazon operated a trial of its new the ‘Amazon Fresh Pickup’ service from two ‘bricks-and-mortar’ locations in its home city of Seattle. At that time, the Amazon Fresh service, which already operated in 16 cities (14 US metropolitan centres, Tokyo, and London) was inviting customers to come and pick their shopping up themselves, rather than having it delivered to their door.
Although Amazon had a large amount of warehouse space and had started working with Whole Foods Market Inc to help grow a network of specialised grocery distribution warehouses, it was not quite ready to go fully into deliveries.
Early in the pandemic here in the UK, the Competition and Markets Authority (CMA) announced that Amazon could invest in food distribution company Deliveroo, which gave Amazon a way in to fresh food delivery across the UK.
With an estimated 15 million Amazon Prime members (Mintel, 2019) plus a booming online shopping and grocery home delivery market that has been given a massive boost by the pandemic lockdown, well-known brand Amazon is expanding it’s Amazon Fresh service across the UK at a key time.
What Does This Mean For Your Business?
Food market commentators suggest that many shoppers are will likely continue buying their groceries online following the increased relaxing of lockdown, and this can only be good news for Amazon as it enters the grocery delivery market in a big way. The fact that Amazon is offering the free delivery service to its Prime users and that Ocado, whose territory Amazon is stepping into, is linked with Marks and Spencer indicates that Amazon will be targeting more affluent shoppers at the premium end of the grocery market e.g. those who regularly shop at Marks and Spencer and Waitrose. Amazon’s brand power, warehouses, established delivery infrastructure and experience mean that it is likely to become a serious competitor very quickly in the £119bn UK grocery market.