Rarely can Amazon.com be accused of arriving late to a party.
Now the online retail giant is making up for lost time by launching its biggest foray into food outside the US with a deal to offer fresh and frozen fare in partnership with Britain’s fourth-largest supermarket operator, Morrisons.
The online grocery market in the UK is booming, with penetration higher than in most other developed countries, according to The Wall Street Journal. Indeed, 27% of British shoppers last year said they shop online for groceries monthly, up from 22% in 2010, according to global food and grocery research firm the Institute for Grocery Distribution. (By comparison, about 12% of US consumers say they order groceries online for home delivery.) IGD estimates that online grocery purchases in the UK will nearly double by 2020 to almost $24 billion, making it the fastest-growing channel there.
The deal with Morrisons will add hundreds of fresh and frozen products to Amazon’s existing offering of packaged grocery goods, enabling it to compete with Britain’s biggest supermarkets: market-leader Tesco, Wal-Mart-owned ASDA, Sainsbury’s, and Morrisons.
Amazon’s move comes at a convulsive time for the UK’s $300 billion grocery market, where the big chains are losing sales to convenience stores and German discounters Aldi and Lidl, while investing heavily in the infrastructure required to meeting increasing demand for online deliveries.
As a result of its new wholesale supply agreement with Morrisons, hundreds of Morrisons fresh and frozen products will become available to Amazon Prime Now (one-hour delivery) and Amazon Pantry customers. Analysts say the tie-up with Morrisons provides a solution to Amazon’s main hurdle in becoming a proper online food retailer: access to a fresh-food supply chain. Amazon has been offering delivery of packaged goods in the UK since 2010 and last fall announced it would expand its same-day delivery service by adding butter and cheese. This latest move signals Amazon intends to become a major player in online grocery retail in Britain.
Industry Impact: Trends in the UK grocery sector, including a growing competitive threat from German discounters Aldi and Lidl, and the prediction that as many as a third of UK retail jobs could be lost by 2025 as the industry moves online, have ominous implications for the grocery sector in the US.
Alexandra Biesada shops everyday, whether she wants to or not, and pines for the days when it was strictly a recreational activity. She has covered the retail beat for Hoover’s since 2001. Follow her on Twitter.