Amazon rollout for groceries: UK is next

29/02/2016

Amazon is taking its grocery delivery service in the UK, partnering with supermarket giant Morrisons to deliver frsh food to customers.

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Under the new deal, Morrisons will supply products for the Amazon Prime Now and Amazon Pantry services.

The deal does not affect Morrisons 25-year agreement with Ocado through which the companies run the supermarket group's online delivery service.

Amazon Pantry was launched in the UK last year, escalating competition with the big four supermarkets, but did not offer fresh food.

Under the new deal, Morrisons will supply fresh, frozen and other goods to Amazon customers.


Analysis- Pressue on established supermarkets

This agreement will sound a warning to the big online grocers that Amazon means business as a destination for UK online grocery shopping. It's fresh produce line could be a major boost for the company, reintroducing many lapsed consumers to its services.

Their partner choice of a value brand makes sense and will be emulated in other markets. Morrison's only has a 3% share of online deliveries in the UK.

It will also put established retailers like the Tescos group will be under renewed price competition

Once in place, Amazon will massively leverage the rest of their inventory to cross promote
Amazon van deliveries will also make Amazon a better margin for delivering the range of its other products that are delivered by third parties for the infamous "last mile" (the phrase used by telecomes industry to to refer to the final leg of the telecommunications networks delivery components and mechanisms to customers).

However, the move could put renewed strain on the existing relationship Morrisons has with Ocado, which supplies delivery services under the supermarket's brand.

David Potts, Morrisons chief executive, is unhappy with the deal struck by his predecessor, Dalton Philips, as the Ocado network does not serve key areas such as the North and Scotland.

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