Daily Management Review

Deal with Morrisons Paves Way for Amazon to Enter British Fresh Food Market


02/29/2016




Deal with Morrisons Paves Way for Amazon to Enter British Fresh Food Market
In a move that would smooth its market reach in Britain, the US online retailer – Amazon, struck its first supply deal with one of the UK’s “big four” supermarkets – Morrisons.
 
From now on Amazon would take orders of and deliver hundreds of Morrisons fresh and frozen food products.
 
The deal would allow Amazon Prime Now and Amazon Pantry customers access to Morrisons ambient, fresh and frozen products in the coming months, Morrisons, Britain’s fourth biggest supermarket, said on Monday.
 
With fierce competition in the British supermarket sector which has convulsed many of the key players in recent year, a step up from Amazon could hurt the traditional players even more, warned analysts.
 
A packaged groceries offer for Amazon Prime members who pay an annual fee of £79 in Britain was launched by Amazon in November.
 
While stopping short of replicating its broader US Amazon Fresh service, which offers about 20,000 chilled, frozen and perishable products and items from local shops, the packaged groceries delivery attempt was by far the Amazon’s most ambitious foray into Britain’s growing online grocery market.
 
The US company was gearing up for a launch of Amazon Fresh in Britain this year, retail analysts have speculated.
 
“The combination of our fresh food expertise with Amazon’s online and logistics capabilities is compelling. This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months,” said Morrisons chief executive David Potts.
 
Morrisons said on Monday that it had reached agreement in principle with the online retailer Ocado to grow Morrisons.com as the British grocer already has a supply deal with the company.
 
While Ocado will deliver a store pick solution for Morrisons that leverages its technology and the supermarket chain’s shops as a fallout of the deal between the two companies, Morrisons would be taking space in Ocado’s new distribution centre, or customer fulfilment centre (CFC), in Erith, south east London.
 
The online reach of Morrison would be expanded to the whole of the UK once the deal between the two companies is implemented. However the amended agreement will only be implemented if it enables Morrisons to achieve profitable growth online and is subject to detailed terms being agreed upon.
 
Following the announcement of the two online retail deals, Morrisons’ share price was up nearly 5% in early trading to 197p, the biggest riser on the stock market on Monday morning..
Ocado was the biggest faller, however, shedding 6.5% to 263p.
 
(Source:www.theguardian.com) 






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