Amazon is stepping up its drive to grab a larger slice of the UK grocery market by pressing ahead with the rollout of its Fresh service and offering members of its Prime scheme free delivery.
From today, Prime members in around 300 postcodes across Greater London and the South East (including London, Surrey, Hampshire, Hertfordshire and Bedfordshire) will benefit from free delivery in two-hour windows on orders over £40. Amazon Fresh purchases had previously required a monthly add-on fee of £3.99 or £2.99 per delivery.
The minimum order value for Amazon Fresh has also been lowered from £40 to £15, although delivery fees still apply on smaller orders.
Meanwhile, a same-day delivery option has been added. This is now available in 40 postcodes including Bracknell, Guildford, Maidenhead, Runnymede, Surrey Heath, Windsor, Woking, and Wokingham, on orders placed before 9pm.
Both the free and faster delivery options for Amazon Fresh will be rolled out to the online giant’s estimated 15 million Prime members across the UK before the end of the year. Birmingham, Manchester and Edinburgh are expected to be among the first cities to benefit from the wider rollout.
Amazon Fresh offers shoppers tens of thousands of items from major food & drink brands and retailers including Booths and Whole Foods Market. It also offers thousands of premium products from artisan and local producers.
“Grocery delivery is one of the fastest-growing businesses at Amazon and we think this will be one of the most-loved Prime benefits in the UK,” said Russell Jones, manager of Amazon Fresh UK.
He stressed that the expansion of its service was on the cards before the pandemic. “We’ve been planning this for a long time. It’s a big step up in volume. In the early days of lockdown all our capacity was being used. We’re confident that we can launch this service now at this point in time,” Jones said.
Rumours that Amazon was working to enhance its Fresh service have been circulating in recent months. The move comes amid a surge in demand for grocery deliveries during the coronavirus pandemic. Recent figures show that the online grocery channel in the UK has nearly doubled its share of the market since March to over 13%.
Retail analyst Richard Hyman suggested that Amazon’s expansion will ruffle the feathers of established supermarket players and could help it capture a significant slice of the market. “Amazon has deep pockets and the massive luxury of not needing to make a profit from food retailing,” he said. “This is just as well because no one really makes much if any money from online food retailing now. A new kid in town with the immediate muscle of the others, and no need to make money, and the best data-driven logistics in retail has been the incumbents’ nightmare for some time, and it’s about to come true.”
However, Tom Brereton, analyst at GlobalData, highlighted that Amazon still needed to overcome shoppers’ loyalty to established grocers. “This will not be an easy mountain to climb for Amazon, despite its financial and logistical prowess,” he said. “Many UK shoppers have a much more emotional bond with food than non-food, and Amazon’s greatest challenge will be in presenting itself as a ‘go to’ destination for food purchases.”
Brereton added: “Also, because of what’s happening with the economy, value is going to be the main driver, which is something Tesco’s been trying to do with Aldi and its price match campaign. Amazon’s target is going to be fairly premium as it has signed a lot of deals with smaller, independent suppliers.”
A battle for upmarket shoppers is set for September when Ocado will start selling M&S products instead of Waitrose food. Hyman said it’s these players who have most to worry about when it comes to Amazon’s latest move: “If you think about the demographic of Prime, these members are relatively better-off… It’s one thing fighting Amazon off when you have an established business, but fighting them off when you’ve got something completely new in the case of M&S and relatively new in the case of Waitrose flying solo will be more challenging.
“Amazon are very clever at getting the rest of the market to follow their agenda and I think what they will particularly be doing is upping the ante on delivery times.”
NAM Implications:
- If Amazon even get near their (Amazon’s) non-food acceptance level…
- …online competition including the mults need to be worried, very worried…
- …unless competitors accept even lower fulfilment profitability by following Amazon’s free delivery.
- Meanwhile, this development has to fuel unprecedented price-war preparation…
- See A Price War to End All Price Wars..?
