Amazon takes on supermarkets with free food delivery
Source: Mintel 28-07-2020

International 28-07-2020

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Customers subscribed to Amazon Prime will be able to order groceries through Amazon Fresh, with free delivery on orders over £40, from today (28 July 2020). Amazon Fresh currently offers same or next-day grocery deliveries in London and the Home Counties.

Customers can choose from around 10,000 fresh, chilled and frozen food grocery products supplied by Whole Foods and Booths, as well as a raft of brand suppliers such as Britvic, Danone, Pepsi and Warburtons and Britvic.

Mintel comment:

“Amazon has long been a player in the UK grocery sector, indeed as shown by Mintel’s Online Grocery Retailing – UK, March 2020 Report it is the fourth most popular place to shop for groceries online, with 25% of online grocery shoppers using the platform in 2019. However we know much of this demand comes from the core site and its marketplace sellers, with just 5% of those with Prime access regularly using Amazon Fresh (see: Amazon: Creating an Ecosystem – UK, January 2020).

Indeed to-date Amazon Fresh is best seen as being in ‘trial’ phase, with multiple barriers to accessing the service limiting its appeal. These are slowly being stripped away as Amazon aims a greater assault on the grocery sector. First the need for an additional Amazon Fresh add-on to Prime was removed in 2019, with customers allowed to simply pay per delivery, and now we have the removal of this charge. Naturally this will open up the service to far more consumers and at a time when value is high on the agenda make the service more competitive across a broader range of demographics.

The need for Prime is still one major barrier, although with 45% of consumers having access to Prime this is still a significant number of shoppers. In particular with Prime membership peaking among the core online grocery shopper base of 25-34s there is a clear audience for Amazon to better market to. However the major barrier to true market share gains will remain the geographic limitations of Fresh, London and select home counties postcodes.

Amazon said it will roll this out to more cities by the end of the year and this is crucial if Fresh is to move from being a niche added bonus for some Prime members to a true challenger. It will also be interesting to see how the business manages Fresh expansion with the more widely available Morrisons at Prime Now offering – which has been key for Morrisons during lockdown. However if Amazon, like it did with the Fresh launch in Germany, focuses strongly on value and moves to price-match some of the leading players this may be the step-change in its position within the UK grocery sector.”