Amazon launches grocery delivery service in UK; will compete with Tesco and Sainsbury's

Amazon has launched its grocery delivery service in the UK called Amazon Pantry, in an effort to expand into the country's convenience household segment. With this service, Amazon will now compete with larger offline supermarkets such as Tesco, Sainsbury's, Asda and Morrisons and discount chains such as Lidl and Asda.

With Amazon Pantry, the company delivers a range of food and grocery products to its prime customers who pay an annual charge of £79 (€111.9, $120.4) for the service. According to a few analysts the move by the internet giant is well timed because of an increasing number of people shifting to mobile phones to make grocery purchases.

However, it would be difficult for Amazon to gain market share because of the increased competition in UK's retail markets, particularly in the fresh food segment where customers are loyal to a supermarket's in-house brand labels.

The Pantry service will initially cover only 4,000 everyday non-perishable items including branded food and drink, pet and baby supplies and health and beauty products from brands such as Heinz, Pantene and Nescafé.

Customers will have to order through a box system, where they will be able to purchase a 20kg box of groceries with next-day delivery costing £2.99. The Seattle-headquartered internet giant also offers a number of pre-packed boxes for occasions such as the birth of a child, a party or a weekend away.

According to analysts, Amazon could replicate its US-based Amazon Fresh service in the UK. This service has been successfully delivering fresh food by truck to customers across Seattle, San Francisco and New York.

Such a service would, however, require investment in cold chain infrastructure and hence would be limited to big cities. Accordingly, Amazon seems to have acquired two former Tesco logistics buildings in the London area, which are understood to have cold chain capability to operate a fresh food business.

Sarah Wilson, an analyst with Egremont business consultants, opined that the Pantry offering would probably lighten the load for shoppers who are looking to purchase groceries in bulk. "All the UK grocers are struggling so this is just another thing for them to ward off."