AmazonFresh food delivery service launches in the UK

Amazon has just announced its food delivery service for its Prime members in the UK. Customers in central and eastern parts of London would be able to place orders from about 130,000 items including thousands of grocery items. Same day delivery would be available by 5pm for orders placed by lunchtime.

After the initial 30-day free trial, the AmazonFresh service would cost about £6.99 ($10) per month, along with the subscription fee for the Amazon Prime service, which is £79 a year. There would be no additional charge for orders exceeding £40, but for delivery under that shoppers will have to shell out an extra £4.

"We are launching with a comprehensive offer in a limited area and will take our time to hone and improve our service based on our learnings and feedback from our customers. We will be very methodical and considered in how we roll this service out further in the UK," said Ajay Kavan, vice president of AmazonFresh.

Competition in UK grocery delivery market

With the launch of AmazonFresh, the company is joining others in the UK grocery market, which is dominated by Sainsbury's, Tesco and Ocado. While shoppers have benefited from the stiff competition, companies offering the service have experienced difficulties in terms of making money.

Sucharita Mulpuru-Kodali, an analyst with Forrester Research, told Bloomberg that Amazon is expecting better success in the UK than in the US, where the service has been available in select areas such as New York, San Francisco, Los Angeles, Seattle and Philadelphia. Customers will have to pay an annual subscription fee of $299 for the service. Amazon has not added any new city for grocery delivery in about 18 months.

"The British consumer is far more likely to buy their groceries online than in the US or Germany. Online grocery shopping is becoming embedded in average consumer behavior in the UK," says a report by research firm Euromonitor.

The grocery delivery service has managed to gain popularity in the UK, with most of the companies charging less than £5 per order. Ocado could not make a profit until 2015. While Amazon has failed to gain customers from its competition in the past, the company has been able to make up for the losses from other profitable businesses such as its Amazon Web Services.

Mulpuru-Kodali said, "For any other company other than Amazon going into the grocery space would be deadly because the economics just aren't there."