Amazon would have to invest more than £350m to begin selling chilled food at scale in the UK, experts have claimed.
The online retailer would need to invest in a chilled distribution centre at a cost of more than £200m and a fleet of temperature-controlled vehicles and warehouses that would set it back another £150m, estimated Siobhán Géhin, associate partner at management consultancy Kurt Salmon.
The estimates, based on what Ocado has spent, assume Amazon would embark on a full-scale UK launch. However, the retailer could choose to copy its Amazon Fresh trial in Seattle and offer chilled food to a limited number of postcodes.
“There is a possibility Amazon might run a small trial in the London area, allowing it to test and learn,” said Géhin.
Another option would be for Amazon to acquire Ocado, which has a market cap of about £560m. As Ocado still operates on razor-thin profit margins and Amazon has recently endured a dip in profitability, Géhin said this would be a “bold and risky move” although not without precedent - it bought online clothing retailer Zappos in 2009 for £587m.
But if it were to go down the acquisition path, Amazon would have to win over Ocado’s shareholders, she added.
“With Ocado and Waitrose now clearly separated and competing head-to-head, some Ocado investors may be nervous about the long-term growth prospects of the business - so an approach from Amazon might prove popular,” Géhin said.