Last week Amazon extended its presence in the UK grocery sector by rolling out AmazonFresh in 69 neighbourhoods across central and east London. But should anyone really care?
The London launch of AmazonFresh will offer one-hour delivery slots (available from 7am ‘till 11pm), a 1pm cut-off for same-day delivery (from 5pm onward), and a range of 130,000 products – all operating, as you’d expect, seven days a week, and on offer to Prime customers. No one knows exactly how many Prime members there are in the UK.
The question of scale also needs to be considered, or rather density.
It’s so obvious it almost doesn’t need pointing out, but offering same-day delivery within high-density population areas such as London is one thing. Covering the whole UK is another altogether.
You can expect to see AmazonFresh cover the whole of London before too long, then move into Birmingham, Manchester, Glasgow, Edinburgh, etc. But if you live in Wales, or Cornwall, or Hampshire, or Derbyshire, or Perthshire, and a whole host of other lovely places all over the UK, don’t throw your Nectar Card or Tesco Clubcard away just yet.
Back in March, Amazon announced a deal with Morrisons, seen by many at the time as heralding the start of a fresh battle front opening up in the supermarket sector. This is a market where pressure from the likes of Aldi, Lidl and other discounters has combined with the decline of the traditional weekly supermarket trip, to make life just that bit harder for the UK’s big name food retailers. Even Poundland now offers online shopping.
Prime members signing up for AmazonFresh pay a £6.99 monthly subscription and get free delivery on orders worth £40 and above. That’s double what you’d pay to sign up for Tesco’s Anytime Delivery Saver service, which does effectively the same thing.
These are interesting times for the UK online grocery sector, which is already one of the most evolved and competitive in the world. With the departure of Andy Clarke from Asda, the longest serving CEO of a major UK supermarket is Mike Coupe of Sainsbury’s who has been in post for only 23 months.
Change, it would appear, really is the only constant.
Sainsbury’s is swallowing up Argos, and getting access to its much-lauded delivery network. Ocado continues to expand into non-food sales, adding high-end cosmetics to the range it offers alongside cookware and pet goods. Last year Asda launched toYou, an attempt to develop a bona fide network offering delivery services any other retailer could make use of.
It’s not a huge leap to see a lot of this as a response to the perceived threat from Amazon. A threat which now looks all the more real, if only in central and east London.
Whether the reality matches the perception is, of course, a different matter. It would be foolish to write-off Amazon’s latest market intervention, as its track record indicates a history of disruption that has generally worked out in Amazon’s favour, but cries of we’re all doomed are probably a little premature too. Whenever Amazon does anything there are always those voices who declare the end is nigh for someone or other. So far this year there have been predictions that Amazon is going to become a fully fledged air carrier and out-gun FedEx for control of the skies, that it will set sail as a global sea freight operator, that it will go head-to-head with domestic carriers like Yodel and Hermes, and that it will become a fashion house.
All of which has some basis in fact, of course, but they don’t necessarily reflect the likeliest of outcomes.
It’s hard to imagine a world where Tesco just sat back and let a market it more or less defined in the UK be taken away from it. Poor Tesco, of course, has had a lot to contend with in the last couple of years, from financial trouble to accounting woes, changes at the top, and restructuring efforts.
Most recently it got rid of the restaurant chain Giraffe, which it bought in 2013 for £50m. From a financial point of view, that will bring in a sum that’s a drop in the Tesco ocean. But it tells a story of a company determined to refocus its resources on what doing what it does best … being Tesco. The decision to buy the Harris & Hoole coffee chain outright earlier this year (Tesco already had a significant holding in it) may appear to contradict this. But with around half of all Harris & Hoole stores located within a Tesco, don’t be surprised if the outliers are dispensed with at some point in the not-too-distant future.
Tesco and Asda have a lot of work to do, and neither is likely to let Sainsbury’s off too lightly, once it is able to bundle up food and non-food into the Argos same-day delivery network. The period between completing the Home Retail Group deal and finalising its integration stretches out before Sainsbury’s and is a glorious opportunity to fight back that its rivals can’t afford to ignore.
That Amazon chose now to get fresh with UK grocery delivery is, well, interesting. There’s certainly already a lot of change, if not turmoil, in the market. But there will also be a lot of determination to improve the customer offer and develop more customer-friendly delivery options; to out-do each other the big food retailers were already going to have to start being more like Amazon.
For once, no one was sitting around waiting for Amazon to scare them into action.