Amazon Fresh thinking?

This week’s ‘Sunday Times’ business carried an article suggesting that Amazon are still anxious to improve their presence in the UK grocery market.

‘Retail Insider’ reckons:

The UK and especially Tesco will also represent the real challenge for Amazon Fresh, if it wants to become internationally accepted. If Amazon can really challenge Tesco in its home market it should not have any problems in other markets. However, Tesco can respond with [20+] years of experience of operating an online service in the most difficult of online retailing categories – grocery. That is something that even Amazon can’t match.

Perhaps they are influenced by the fact that Britain is Europe’s largest on line grocery market, and that Tesco, even as the world’s biggest online grocery service is now trying to compete with Amazon Fresh where it has a presence by offering some deliveries within the hour.

The launch by Tesco of discounter look alike, Jack’s certainly suggests that Tesco will be no pushover for anyone who choses to compete on their territory  – especially as they now have to survive in fortress UK, having been forced by the City to sell their US operation as well as their succesful operation in Korea, a country that has the largest share of the grocery market on line in the world. Meanwhile the UK on line grocery market is second only to China in turnover.

Amazon will also find it difficult with Tesco’s enormous range which in a big store and on line could well be 20,000 lines – a bigger range than any other supermarket, never mind Amazon.

And yet, having persuaded the Competition and Markets Authority (CMA) to allow it to purchase ‘OneStop’ and more recently, Bookers, Tesco is now in the position that it can, logically, have little objection to the merger of Asda and Sainsbury – indeed nor can the CMA in broad terms.

The most likley outcome is that the Asda and Sainsbury combination will be forced to sell some shops where a lack of local competition might otherwise result.

As convenience rather than weekly shopping is the way the grocery market is now heading, these ‘big box’ stores are not likely to have a queue of prospective purchasors.

The danger is that, with the ability of Amazon to leverage ‘patient finance’ where it is happy to accept losses in businesses for years and when Walmart /Asda probably see Sainsbury as a proxy to take on Amazon, it would be ironic and not a little worrying for UK grocers – notably Tesco and its City backers – if the only taker for these surplus stores were in fact Amazon Fresh.

 

 

Comments

  1. Andrew (Andy) Crow -

    What could give amazon an edge is if they set up their operation as online only.

    That would allow automated picking in relatively cheap warehouse premises.

    The success of their challenge to the established UK players will depend how they design their challenger operation I suggest. If they go head to head with retail stores as their business model they will find it hard going and in the longterm there will be no advantage whatsoever to the consumer.

    There is only room for so many profitable superstores per head of population, then it’s shake-out time.

    I wonder just how much money Jeff Bezos is investing in the development of autonomous delivery vehicles…???

  2. Peter May -

    That puts them up against Ocado, who even after 18 years still don’t deliver throughout the UK. Clearly with more money Amazon might be quicker at going national but I don’t think they’d find it easy. Logistics in a crowded island is always challenging as Brexit may well prove to us all. And meanwhile click and collect seems to be getting more popular!
    If he could get those autonomous delivery vehicles here for March 29th even I might become a fan….

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