Amazon takes on the UK supermarkets with free food delivery

Amazon Prime subscribers 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.

Amazon has long been a player in the UK grocery sector; indeed, as shown by Mintel’s latest online grocery retailing report, it is the fourth most popular place to shop for groceries online, with a quarter 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 a small proportion of those with Prime access regularly using Amazon Fresh.

Some of the product categories of Amazon Fresh

Source: Amazon

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 makes the service more competitive across a broader range of demographics.

The need for Prime is still one major barrier, although with many 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 itself to. However, the major barrier to true market share gains will remain Fresh’s geographic limitations of London and select home counties postcodes. Whilst Amazon doesn’t yet have the capacity to compete with the likes of Tesco, which due to the necessary investments needed to cope with demand during the pandemic now has the capacity to fulfil more than 1 million orders a week, it would probably target the urban areas where online food shoppers are disproportionately located.

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 UK grocery 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 the supermarket chain 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.