Amazon is to deliver food to another 42 postcodes in the south east of England as its aggressive assault on the online grocery market continues.
As it approaches the first anniversary of its UK launch, Amazon Fresh will announce this week it is extending food deliveries to new areas in Hertfordshire and Bedfordshire. The expansion means that Amazon Prime members from Watford and St Albans to Berkhamsted and Luton will be able to order their weekly shop.
Following the expansion Amazon Fresh will be available in 302 postcodes across London and the South East in a move that will put pressure on Ocado, its rival online food retailer. Jeff Bezos, Amazon’s chief executive, who once described his approach to the publishing industry as a “cheetah pursuing a sickly gazelle”, has made it clear that there is no sector of retail, including online food delivery, which Amazon does not want to dominate.
Market experts speculate that Amazon Fresh’s rapid expansion and its surprise tie-up with Morrisons, which already had a 25-year supply contract with Ocado, is starting to eat market share in the south east from Ocado, the UK’s main “pure play” online food protagonist.
Ocado took 15 years to turn its first modest profit and has long been a stock that investors either love or hate. However, Ocado has achieved its own coup after finally delivering on its promised deal to license its proprietary technology — Ocado Smart Platform — to an international retailer. Yesterday the company, started by former Goldman Sachs bankers, said that it had signed a deal with a European grocery retailer. It did not disclose the name of the retailer because of commercial sensitivities but said that the transaction would be the first of “multiple” deals in the medium term.
Ajay Kavan, vice-president of Amazon Fresh, said there was no doubt that the UK grocery sector was one of the most competitive in the world. Speaking to The Times, he said: “We recognised from day one that the bar in UK grocery is high but we have always believed that the key to long-term success in Fresh is offering a vast selection at low prices with an excellent customer experience. We said we would take our time and be methodical but a year since we launched we are really pleased with the take-up and the response.”
When Amazon Fresh launched last June it offered 130,000 products in 69 postcodes. Now it has 180,000 products — from fresh produce and baked goods to homewares, electronics, pet supplies and health and beauty products — and has more than quadrupled the areas it supplies. Mr Kavan said Amazon was also “very pleased” with its relationship with Morrisons and said that some of its products, such as its semi-skimmed milk, were among the top sellers.
Amazon and Ocado are competing for market share in one of the most advanced online food markets in the world. Last week data from Kantar Worldpanel showed that Britain topped a poll for the largest online food baskets in the world for the second-year running. The information group said that the average expenditure on a UK online grocery basket was $83.40 (£64.85), which was far higher than the second-place France where basket sizes averaged $68.60. More importantly, Kantar Worldpanel said that there was significant capacity for the market to grow because fewer than one third of UK households bought their groceries online. Mr Kavan said that Amazon was “really focused” on Amazon Fresh and there were no plans to expand outside southern England, but “we have launched in Japan [nine weeks ago] and in Berlin [five weeks ago]”.