Amazon partners with a major grocer
Amazon has partnered with Morrisons, Britain’s fourth largest supermarket, to offer fresh and frozen goods to its Prime Now and Pantry customers. Under the terms of deal announced Monday, Morrisons will supply “hundreds” of products, including fresh food, for Amazon to sell to members of its £79-a-year Prime service.
Amazon last November launched Amazon Pantry in the U.K. The service covers delivery of more than 5,000 pantry items that don’t require refrigeration for a flat fee of £2.99. Prime Now, introduced in London last June and also in Birmingham, Newcastle and Manchester, covers more than 15,000 items with a fee of £6.99 for one-hour delivery, or with free delivery within two-hours. Amazon Fresh is being tested in Birmingham.
Morrisons has only three percent of the U.K.’s online grocery market but is the U.K.’s second-biggest manufacturer of fresh food, which it sells wholesale as well as in its own stores.
“Today’s agreement is built on Morrisons unique strengths as a food maker,” said David Potts, Morrisons’s CEO, in statement. “The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling.”
Morrisons will continue to run its own online delivery service through Ocado, although some felt the new Amazon relationship may threaten that deal.
Amazon, which launched Amazon Fresh in Seattle in 2007 and slowly expanded it to other cities, has been challenged by the complexity of fresh and frozen. After waiving extra fees for Prime members for several years, Amazon last year began charging customers $299 a year for its Prime Fresh membership in the U.S.
In the U.K., online grocery is more established, and the leaders, Tesco, Sainsbury’s and Walmart’s Asda, also offer “click and collect” services.
Still, the U.K. majors have all been losing major share recently to Aldi and Lidl, which don’t offer home delivery. Some speculated whether Amazon would be able to leverage its logistics system to further lower online food prices.
Retail Vision consultant John Ibbotson, told Reuters, “Tesco could soon be about to find out what it’s like to be David rather than Goliath.”
- Agreement with Amazon and Morrisons.com update – Morrisons
- Amazon to attack UK grocery market with Morrisons deal – Reuters
- Morrisons signs deal to sell food to Amazon customers – BBC
- Amazon strikes online grocery deal with Morrisons – Financial Times
- Amazon Strikes Deal With U.K. Grocer Morrisons – Wall Street Journal
- Amazon partners with Morrisons – Fierce Retail
DISCUSSION QUESTIONS: Why did Amazon need to partner with Morrisons? Does it make sense for Amazon to partner with a major grocer or wholesaler to support fresh food deliveries in the U.S.?