Supermarkets under pressure as Amazon Fresh expands

amazon1Amazon is ramping up its quest for global domination once more with the online delivery giant revealing that it is making its Amazon Fresh service free to Prime subscribers, as it looks to bite off a larger slice of the £119bn UK grocery market.

Although the Fresh service was launched in 2016, it has so far failed to make any headway in the sector, despite offering Morrisons products as well as grocery items supplied by Booths and Whole Foods, and brand suppliers such as Pepsi, Danone, Warburtons and Britvic.

But with more and more consumers shopping online since Covid-19 struck, there is a huge opportunity to boost its business, with Internet sales rising by 91% in May and June. Nearly one in five British households bought online in the month to mid June, totalling 5.7 million shoppers.

Many supermarkets are now playing catch-up to meet this increased demand, none more so than Ocado which recently admitted there are 1 million customers waiting to join its online grocery service. Marks & Spencer, whose £750m joint venture with Ocado is due to launch in September, has already warned customers that there will be “very limited” space for new shoppers.

Meanwhile, Waitrose will now be going it alone, while delivery slots for Tesco, Sainsbury’s and Asda are still hard to get at short notice.

No doubt with this  in mind, Amazon said it will speed up delivery times to make same-day delivery available to UK grocery customers in some parts of the South East. Some 15 million Brits have already signed up to Amazon Prime and will now be able to order groceries through Amazon Fresh, with free delivery on orders over £40, from this week.

Shoppers who want to specify a one-hour time slot will be charged £3.99, while orders under £40 will also be charged a £3.99 delivery fee for two-hour delivery and £6.99 for a one-hour slot.

Amazon said the expansion will initially cover up to 300 postcodes, focused around London and the South East, with the service be rolled out to other areas of the UK more by the end of the year.

It said Prime customers in more than 40 postcodes across the South East, covering areas such as Woking and Guildford, will be able to order same-day grocery delivery.

Amazon Fresh UK country manager Russell Jones said sales have been “particularly strong” following the lockdown, but stressed that the latest move had been in the pipeline long before coronavirus hit the UK.

He added: “Prime members love the convenience of grocery delivery at home, which is why we’ve made Amazon Fresh a free benefit of Prime. 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.

“We will keep improving the grocery shopping experience so by the end of the year, millions of Prime members across the UK will have access to fast, free delivery of groceries.”

Amazon Prime already offers members free next-day Amazon delivery, as well as films and TV programmes through the Prime Video streaming service.

Retail analyst Richard Hyman said: “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.”

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