UK supermarket Sainsbury's this week reported a 0.8% drop in like-for-like retail sales for its first quarter, but like-for-like transaction growth across its superstore network, convenience and online channels.

The dip in sales was largely attributed to a sustained period of food price deflation, but CEO Mike Coupe described the three-month trading performance covering the 12 weeks to 4 June 2016 as "solid" and said he was confident in the current business strategy. He also highlighted the competitiveness of the UK grocery sector, saying that price pressures in a crowded market will ensure competition will remain strong for some time.

Against this backdrop, Amazon is preparing to launch its Amazon Fresh proposition, marking its first major foray into serving groceries to UK consumers. The US-based online retailer's strategy is seemingly to be competitive on price in whichever territory or sector it sells goods, so the company's imminent arrival in UK grocery is expected to bring further challenges to the market incumbents.

Essential Retail questioned Coupe on how he expects Amazon Fresh's imminent arrival to impact UK grocery, and he acknowledged the e-tailer's success in other markets.

"Clearly, they are another competitor," he said.

"We welcome competition; competition makes us all better but you can never underestimate a company like Amazon. They have deep pockets and they are very tenacious in making things work."

Coupe also noted that the UK online grocery market is very different to the areas Amazon has previously focused on in the UK.

"I suspect taking on the grocery sector in the UK in one of the most competitive markets for online and one of the most developed grocery online markets in the world is not a challenge for the fainthearted," he said.

"We welcome the competition but equally I suspect they'll have their work cut out selling short-life volatile groceries, which is very different to selling books and cameras. We'll see how that plays out over time."

With no store footprint to its name and with the vast majority of food and grocery shopping still conducted in stores, Amazon will have a significant journey ahead as it looks to shake up UK grocery. It is the online-only grocer, Ocado, that will face direct competition from Fresh's imminent arrival, but Amazon has shown around the world that its tech capability and supply chain infrastructure can help it gain market share at pace.

The recently agreed supplier partnership with Morrisons has helped Amazon scale up its fresh food offering for its Prime Now and Pantry services, and is expected to be leveraged if and when Fresh launches in the UK.

Tim Reay, head of grocery at eCommerce agency Salmon, said: "Supermarkets and grocers need to assure that their digital offering is not simply a part of their service but is absolutely core to it – making sure the shopping process is as smooth as Amazon.

"From back-end systems ensuring that warehouses and distribution centres are perfectly aligned to order processing, to a sleek front-end which aids the shopper on the way to purchase. If Amazon are going to take-on the grocery market, you can bet that there will very rarely be "out of stock items" or "replacements" delivered. This is the kind of service overall traditional grocers may need to look at if they are to compete. They also need to consider how they diversify – perhaps through automated ordering – to combat the threat of a Amazon Fresh whilst keeping their delivery operations profitable."

What else is new at Sainsbury's?

This week's quarterly results announcement from Sainsbury's was the first since the retailer made the decision to discontinue its Brand Match scheme. The company drew attention to some of the ways it has committed to reducing prices on everyday goods, which included bringing down the cost of its 1.35kg whole chicken from £3.50 to £2.95, its 12 free range woodland medium eggs from £2.00 to £1.75 and its 250g grated cheddar cheese from £2.00 to £1.75.

The period also saw Sainsbury's launch a new mobile grocery app, and continue its trials with the SmartShop app – which allows customers to scan as they shop in a store and pay for goods on their mobile phone. The SmartShop app is only available in the company's Harpenden and Alperton stores, and Coupe said development work is ongoing before full roll-out across the UK can be announced.

He noted: "You can take it as read that we're excited about what it offers us, our customers are excited by it and we will anticipate, I'm sure, in the fullness of time that we'll roll it out further as and when we have got the base technology in a way we are really happy with."

Sainsbury's was an early example of a retailer providing customers with a transactional mobile app, but the platform was removed  as the business looked to develop greater mCommerce capability. That new app was unveiled in Q1 and is part of the company's strategy to serve its shoppers wherever and however they wish to be served.

Coupe remarked: "The underlying direction of travel for our customers is to want to interact with us on a digital basis more and more – and that's driven by mobile phone technology.

"We need to make sure that our proposition plays to that agenda. There are some quite interesting things that sit behind it [including] joining together people's baskets wherever they shop with us [and shopping list functionality]."

Today also saw a selection of industry analysts test a new mobile service at Sainsbury's London Wandsworth store, which allows local customers to order products via a mobile app called 'Chop Chop' and have them delivered to their homes within the hour.

At the end of the last financial year, Sainsbury's announced it would effectively be doubling its dedicated click & collect facilities to 200 before the end of 2016-17, and Coupe confirmed this is still the plan as the retailer looks to meet the demands of modern shoppers.

"That's at the heart of what we're doing with the acquisition of Home Retail Group and Argos because they have a fantastic supply chain network that allows us to expand our click & collect offer and our online business quite substantially over the next period of time. It's very much an acceleration of existing strategy."

Home Retail Group Q1 results are announced on Thursday 9 June, as Sainsbury's proposed takeover of the Argos owner undergoes a review from the Competition and Markets Authority watchdog to ensure it will not result in a substantial reduction in competition for the public.

UPDATE: Less than 24 hours after Essential Retail's chat with Mike Coupe, Amazon announced on, Thursday morning, the launch of Amazon Fresh in London. Click here to read a comment piece from Savvy' insight director, Alastair Lockheart, and there will be further analysis on the e-tailer's arrival on the UK grocery scene in the coming days.