Amazon free delivery plan primed to hit grocery rivals
Internet shopping titan’s move could lead to price war and puts traditional supermarkets on back foot
AMAZON is to offer free grocery delivery to millions of customers in a massive expansion of the company’s Fresh food network, throwing down the gauntlet to traditional supermarkets.
The internet shopping titan will from this morning allow customers to buy cheese, baked goods, fresh meat, fruit and vegetables with no delivery fee if they subscribe to its £7.99 a month Prime service.
Initially the offer will only be available in London and the South East, but Amazon intends to roll it out across as much of Britain as possible by the end of the year.
It will be seen as a major intervention as Amazon seeks to capitalise on surging demand for online groceries after lockdown triggered a huge change in shopping habits, with firsttime customers logging on in droves.
All supermarkets charge for delivery at present. The fees are seen as crucial for funding online sales, but Amazon’s decision could spark a major price war.
Chains have been forced to hire more staff who can pick and pack orders in stores, as well as bringing in extra drivers as they race to conquer the growing digital market.
Because of these costs, profits are virtually zero for sales coming through their websites despite the delivery charges. Tesco and Sainsbury’s have managed to double their capacity since March.
The share of the overall online shopping sector has almost doubled in recent months from 7pc before the pandemic to 13pc in May, according to data company Nielsen.
Russell Jones, boss of Amazon Fresh in the UK, said that the company’s assault on the grocery market had been years in the making.
He said: “Grocery is one of our fastest growing businesses.
“It’s a really big deal for us. It’s not just something we’ve spun up.”
The e-commerce powerhouse sent shockwaves through the industry when it bought high-end US company Whole Foods Market for £10bn in 2017. It had launched Amazon Fresh in the UK a year earlier.
Supermarkets have long feared a challenge from the $1.5 trillion (£1.2 trillion) tech behemoth, which critics accuse of almost single-handedly destroying much of the high street through an aggressive campaign of expansion.
It has far deeper pockets than any UK player and is thought likely to accept many years of losses in order to beat rivals.
Thomas Brereton, a retail analyst at GlobalData, said: “Amazon can keep doing this.
“The fear of losing money is nowhere near as great [for Amazon] as it is for the other grocers. It is going to worry everyone in the market.”
Prime customers will be able to choose from tens of thousands of grocery items from major brands including Whole Foods, Pepsi and Warburtons.
They can also add premium products from artisan and local businesses such as Gail’s bakery and Paxton & Whitfield, the cheesemonger.
Amazon already has 14 depots in Britain where it can store the food at the right temperature, it said.
Meanwhile yesterday, Amazon said it would create a further 1,000 jobs in Ireland, bringing the total workforce in the country to about 5,000.
It also said it would invest in a new campus in Dublin for its crucial cloud computing business.