Amazon has launched its biggest foray into food outside of the U.S. with a deal in Britain to offer fresh and frozen goods to customers, in some places as quickly as under one hour, in a deal with supermarket Morrisons, according to Reuters.
Enabling the online retail giant to compete with Britain's biggest supermarket stores and smallest local shops, the deal marks Amazon's latest assault on a British market already buckling under the weight of fierce competition and rapid online growth.
Amazon will now add fresh and frozen products to its existing offering of packaged grocery goods, setting it up against established online rivals Tesco and Ocado in Britain's dedicated online retail market. Since 2013, Morrisons has outsourced logistics for its own online food business to Ocado.
"Tesco could soon be about to find out what it's like to be David rather than Goliath," said Retail Vision consultant John Ibbotson.
Morrisons announced separate plans on Monday to extend its own online grocery deliveries to the whole of the U.K, in agreement with Ocado. It would take space in a new Ocado London warehouse while Ocado will provide Morrisons with software to fulfill online orders from its own stores.
For Morrisons' rivals, the arrival in the coming months is likely to bring yet more pain to a sector which has been convulsed by fierce competition in recent years, with shoppers turning online and to discounters and convenience stores.
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Editors Insight: Morrisons is looking to the small but growing food e-commerce segment to strengthen its competitive position against its larger rivals, Asda, Sainsbury and Tesco. The Amazon/Morrisons partnership also positions Amazon against Ocada, a dedicated e-commerce grocer that has emerged as a leader in U.K. grocery e-commerce that Morrisons continues to work with.
The Amazon/Morrisons partnership is further confirmation that success in grocery e-commerce requires a combined web and physical infrastructure. Amazon, which began as an e-commerce company, has clearly recognized the importance of having a network of distribution and sortation facilities to support its e-commerce business.
Food Logistics reported this past September that retailers that want to succeed in the rapidly-expanding e-commerce business recognize that establishing a presence in food e-commerce requires establishing high-density delivery capabilities. Once a retailer establishes this capability, they can command a strong e-commerce position in all product segments.
Another story in today’s Food Logistics newsletter reports that European e-commerce retailers are expanding into non-food in order to improve the sustainability of grocery e-commerce, the most challenging e-commerce business sector. 2-29-16 By Elliot Maras
