This week Amazon delivered its first UK parcels by drone. The trial, in Darlington, County Durham, is limited to everyday, non-perishable items such as health & beauty products, batteries and cables, in packages of no more than 2.2kg. So for now at least a full weekly grocery shop seems remote.
But never underestimate Amazon, even in grocery. Because far from giving up on grocery, with the distraction and demands of physical Amazon Fresh retail stores behind it, Amazon appears revitalised: in recent weeks it’s slashed thousands of prices, making it as cheap or cheaper than Tesco, Asda, Morrisons and Sainsbury’s for nearly two thirds of 2,313 products stocked by Amazon and at least one full-range supermarket and winning our Online Grocer 33 with ease.
The shift on price comes amid ongoing work this year to expand geographical coverage of its grocery deliveries, and to make them faster, with a same-day option becoming the new standard. And in January it launched a rapid grocery service – Amazon Now – offering thousands of food products and household essentials for delivery in 30 minutes or less.
Which is all great for customers it is hoping to tempt away from the major mults, but what about suppliers? Amazon’s relationship – if it can be called that – with most grocery suppliers is fraught. It is currently under investigation by the Groceries Code Adjudicator for delays in payments to suppliers, and remains bottom by some margin in the latest GCA ranking of the 14 retailers, having barely improved in the last year.
It also lacks – as yet – the critical mass of customers in grocery it enjoys elsewhere. A full grocery basket has been available to many Amazon shoppers for almost a decade already, of course, and in that time it’s managed to eke out less than 2% market share. That’s because it faces stiffer competition than in other markets. And of course suppliers will be wary of supporting growth if they have to foot the bill for price cuts. So an Amazon charm offensive is underway with suppliers – present and potential. A new marketing campaign for Amazon grocery is also in the works.
Amazon says its online grocery business grew twice as fast as the overall business last year, and nearly one in three items sold on Amazon.co.uk were grocery or household items. It’s also just opened up its logistics network to non-sellers. But if its grocery ambitions – now sensibly concentrated online – are to be met, it will need to work harder to win over a supplier base that has never been easily awestruck.
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