Amazon is stepping up its competition with British supermarkets by pressing ahead with the wider UK rollout of its online grocery service by the end of the year.
Larger orders on Amazon Fresh will be free to members of the online retailer’s Prime service from Tuesday and will begin to cover more areas in the UK, as the $1.5tn (£1.2tn) company seeks to capitalise on the growth in doorstep deliveries during the coronavirus pandemic.
Amid criticisms that the scheme amounts to a “postcode lottery” that many Prime members living outside London and the home counties have been unable to access, the e-commerce giant is also expanding the scheme to cover more areas of the UK and to allow greater take-up by its estimated 15 million members. Amazon Fresh is currently available in just 300 postcodes in and around London.
It is understood that Prime members in Birmingham, Manchester and Edinburgh will be among the first to benefit from a wider rollout by the year end. Last month the Bradford-based supermarket chain Morrisons – which collaborates with Amazon on the US company’s same-day grocery service – said it had more than doubled the number of stores serving Amazon Prime customers to 40.
Until now, Amazon Fresh purchases have required a monthly add-on fee of £3.99 or a £2.99 delivery fee (in addition to the annual Prime subscription fee of £79 annually). From Tuesday, orders worth more than £40 requiring two-hour delivery will be free but will cost £3.99 for a one-hour slot. Orders under £40 will cost £3.99 for two-hour delivery and £6.99 for one hour, however. The minimum order value will also be lowered from £40 to £15.
In other changes, the service is also being speeded up, with same-day grocery deliveries up to midnight in, initially, more than 40 postcode districts in the south-east guaranteed, provided shoppers order by 9pm.
The bold move by Amazon means it is keen to carve out a slice of the rapidly growing online UK grocery market – forecast to grow 76.2% to £19.5bn in 2020 – following the significant uplift in demand amid the Covid-19 lockdown restrictions.
“Prime members love the convenience of grocery delivery at home, which is why we’ve made Amazon Fresh a free benefit of Prime,” said Russell Jones, country manager, Amazon Fresh UK. “Grocery delivery is one of the fastest-growing businesses at Amazon … 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.”
“They will certainly cause major disruption, ruffle feathers and capture a material slice of the market,” said retail expert Richard Hyman. “Amazon has deep pockets and the massive luxury of not needing to make a profit from food retailing. 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.”
Recent figures from Nielsen reveal that online grocery sales jumped 92% in the four weeks to 12 July, rising to 13% of the grocery market from just over 7% before the lockdown started.
One analyst, however, warned that Amazon will have to overcome shoppers’ loyalty to established grocers. “This will not be an easy mountain to climb for Amazon, despite its financial and logistical prowess. 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,” said Tom Brereton, associate analyst at GlobalData.