Will Amazon Fresh threaten the UK grocery market?

The overcrowded UK grocery market might have to make room for another player this autumn, with rumours Amazon Fresh will cross the Atlantic later this year. But will Amazon's online fulfilment model offering same-day delivery make an impact on UK groceries?

Amazon's grocery delivery service is rumoured to be launching in the UK as soon as September, according to The Times. The model – which is currently only available in selected US cities – offers customers who pay a yearly fee of $299 same or next day delivery on 500,000 items including fresh and frozen foods.

Amazon's grocery service is also tied together using its Dash button and wand which are digital replenishment tools available to US consumers.

Shoppers can use the tools, in their own homes, to replenish products by scanning items or pressing a button which links the order directly to their Amazon Fresh account.

But will Amazon Fresh take off in the UK and pose a threat to traditional grocers? The big four supermarkets (Tesco, Asda, Sainsbury's and Morrisons) have been battling for market share in recent years, and the discounters like Aldi and Lidl have proven to keep them on their toes.

Martin Newman, CEO of consultancy firm Practicology, believes the launch of Amazon Fresh will threaten UK grocers. He said: "The more you can buy from one retailer the better the customer proposition and experience is, and the harder it is for consumers to choose to go elsewhere."

But Miya Knights, global retail technology research director at Planet Retail, said it might take some time for the Amazon threat to emerge. 

"It is likely to have a limited geographical reach at launch, as it does in the US," she said.

Knights also suggested Amazon Fresh will be more successful at driving a profit from online grocery shopping than traditional grocers.

"The big four have to date struggled in this space, and therefore prefer to incentivise click & collect sales to keep margin erosion at bay. Whether Amazon also offers click & collect, through lockers for instance, as well as if it can make its Prime membership and subscription model pay for those using Amazon Fresh, will decide if it can successfully offer the service competitively, and at scale."


But Amazon's main competitor Ocado – whose shares fell over the weekend partly due to the Amazon rumours  ̶   has had to spend millions of pounds to perfect its online fulfilment proposition over the years. The US e-tail giant on the other hand has not had similar competition in the States and may have to up its game to attract Ocado customers to its platform.

The other hurdle Amazon will have to overcome is its membership fee if it chooses to keep this for UK customers. US customers pay almost $300 dollars for the privilege of using Amazon Fresh, which is on top of the cost of groceries, and customers must spend over $50 per order for same and next-day delivery.

The big question is whether UK customers will be prepared to spend that amount when native grocers charge zero? Danielle Pinnington, managing director at Shoppercentric, is not so sure, she thinks a subscription charge will be a barrier to entry for Amazon.


Pinnington explained that Amazon's biggest challenge is convincing UK customers that its fresh products will be of high quality. If they manage to do that, then a subscription fee may be plausible.

"It's all about the quality perception," she said. "Customers will be willing to pay extra if they're getting extra, and buying into a proven quality standard."

She also said customers will be questioning whether Amazon will handle their food in the same way it handles packaged goods. "Amazon isn't known for food, whereas Ocado had links to Waitrose right from the start," she said, questioning whether Amazon's robots would pick a ripe banana to a customer's taste.

Pinnington also questioned whether Amazon's branding of its replenishment button and wand as 'Dash' is the best phrasing when it comes to inspiring an image of quality groceries. "Quick is good in some respects, but in fresh products quick isn't necessarily going to deliver quality products and it implies the danger of lack of care," she added.

But she pointed out that online grocery shoppers are fickle and might be tempted to trial Amazon Fresh. "Those who online shop tend to try out different grocers out if there's better costs or cheaper delivery," she explained. "And a fair proportion are always willing to give it a go – but they only give the business one chance and if it doesn't work they will revoke to their normal online grocer."

Threat to independents

And it is not just the larger grocers who might be threatened, but also the small independent stores who are often associated with quality, local food.

E-tail start-up company Hubbub is a delivery service in London which offers customers the ability to purchase goods from local butchers, bakers, fishmongers, greengrocers, and other specialist shops online. Hubbub visits the various shops collecting ordered goods and delivers them to the customer in a single delivery. The e-tail start-up prides itself in not using robots, but conversing with its customers via its web platform and mobile apps, so they can speak to the independent store and explain exactly how ripe they would like their bananas.

If Amazon Fresh does hit British shores in the next couple of months, retailers of all shapes and sizes are in for further disruption to an already competitive market.