Gro­cers brace for food de­liv­ery fight as Ama­zon rolls it in with Prime

Web gi­ant’s ex­pan­sion of its Fresh arm poses new headaches for the big four play­ers, writes Laura Onita

The Daily Telegraph - Business - - Business -

If I were run­ning a tra­di­tional su­per­mar­ket chain, I would be wor­ried. Spec­u­la­tion has been rife for a while about what Ama­zon’s next move will be as it tries to mus­cle in on the gro­cery mar­ket in Bri­tain. Now we know: free de­liv­ery in­cluded as a ser­vice with Ama­zon Prime.

The Amer­i­can e-com­merce pow­er­house is of­fer­ing con­sumers the op­tion to shop for goods such as bread, ar­ti­san cheese and lava­tory roll on its web­site and not pay an iota.

At the same time, it is es­ti­mated that around 43pc of Bri­tons have ac­cess to the mem­ber­ship scheme.

“For Ama­zon, it’s a nat­u­ral pro­gres­sion to try to bring ev­ery­thing into one ban­ner,” says Thomas Br­ere­ton, a re­tail an­a­lyst at re­search firm Glob­alData.

The move has the po­ten­tial to force other chains to match its of­fer at a time when they can hardly af­ford it.

Su­per­mar­kets have been bat­tling to win cus­tomers and stay prof­itable in a hy­per-com­pet­i­tive arena for years.

And just as coro­n­avirus has made some be­lieve that the boom in home de­liv­ery could lead at last to prof­its on­line, along comes Ama­zon and ups the ante again. All the big four chains charge for on­line or­ders and the prof­its are vir­tu­ally non-ex­is­tent, as the costs of pick­ing and de­liv­er­ing the or­ders add up.

In 15 years, Ama­zon has sin­gle­hand­edly changed the way cus­tomers think about on­line shop­ping. Be­fore Prime launched in 2005, 48-hour ship­ping was un­heard of. Next-day de­liv­ery is now de rigueur for most re­tail­ers. It then sent shock­waves through the in­dus­try when it gob­bled up or­ganic food chain Whole Foods for £10.7bn three years ago. It launched its “Fresh” on­line food de­liv­ery busi­ness four years ago in the UK and ev­ery­one has been pay­ing close at­ten­tion to it since.

While Ama­zon can af­ford to lose money to at­tract new shop­pers to its food of­fer­ing, the likes of Tesco and

Sains­bury’s, with huge fixed costs at­tached to their hun­dreds of stores, would rather not. The main chal­lenge for the Amer­i­can be­he­moth will be to lure shop­pers to its web­site for any­thing other than tools, books, kitchen uten­sils, gad­gets and other home­ware para­pher­na­lia.

Only a frac­tion of the coun­try uses the web­site to or­der food de­spite its ex­ist­ing tie-ups with Mor­risons and Booths, the so-called Waitrose of the North. This has the po­ten­tial to un­leash a mar­ket­ing and pro­mo­tions war be­fore Christ­mas, Br­ere­ton says, as both Waitrose and Marks & Spencer are poised to sell more on­line from this au­tumn.

It will also face lo­gis­ti­cal hur­dles, such as be­spoke vans and de­pots to store chilled food.

It does, how­ever, al­ready have 14 pur­pose-built de­pots to sup­port its food arm in the UK, which lays bare the ex­tent of its am­bi­tions.

In con­trast, on­line gro­cer Ocado has only a hand­ful of ware­houses, al­beit they are pow­ered by ro­bots, which are quicker than the hu­man pick­ers that Ama­zon will use. Bosses at Mor­risons’ head­quar­ters in Bradford will not be pleased to hear of Ama­zon’s plan ei­ther. Only in May it said it was ex­pand­ing the same-day gro­cery de­liv­ery ser­vice it runs with Ama­zon as on­line or­ders jumped.

Su­per­mar­ket chains would be fool­ish to burn through cash to be on par with Ama­zon. They should use their dif­fer­ences to their ad­van­tage and fo­cus on what sets them apart, such as their sus­tain­abil­ity cre­den­tials and en­vi­ron­men­tal ini­tia­tives, which shop­pers in­creas­ingly take into ac­count be­fore they part with cash.

Their other trump card is loy­alty, his­tor­i­cally stronger within the su­per­mar­ket ranks – but fi­delity could be fickle as the pan­demic bat­ters the con­sumer econ­omy. Gro­cers, on guard!

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