Amazon takes on grocers with ‘free’ home delivery

Supermarkets were facing a fresh challenge today after online giant Amazon announced that Prime customers can now get their food shop delivered for free.

Shoppers using the £1.17billion company are able to get groceries straight to their door without leaving their sofas on the new service.

It replaces the previous service where Prime members – who already had to pay £7.99 for a one-day service – needed to pay an extra £2.99 for a food order. 

Now as long as customers in London and the south-east – including Surrey, Hampshire, Hertfordshire and Bedfordshire – spend more than £40 on Fresh orders they will get their groceries delivered free.

The US e-commerce giant also plans to expand the free delivery to ‘millions more’ customers around the UK by the end of the year and speed up deliveries in a bid to capitalise on the booming online grocery industry.

It is understood that Prime customers in Birmingham, Manchester and Edinburgh will be among the first to benefit from the wider roll-out. 

A spokesman for Amazon told MailOnline that Amazon Fresh will supply food from supermarkets Morrisons, Whole Foods Market, and Booths, as well as smaller suppliers including GAIL’s Artisan Bakery, C.Lidgate and Paxton & Whitfield.

But food from ‘nervous’ supermarkets including Tesco, Sainsbury’s and Asda will not be supplied as the US retailer looks to ‘capture a material slice’ of the market.

Shops that come in under £40 will be charged a £3.99 delivery fee. Customers will be able to access between 12,000 and 15,000 products online – compared to 40,000 products on Ocado. 

Shoppers in 40 postcodes in Surrey and Berkshire can also book a one-hour slot for £3.99 or get same-day delivery. 

Retail analyst Richard Hyman called Amazon a ‘voraciously ambitious business that wants to dominate every market that it trades in’.

Speaking on BBC Radio 4’s Today programme, he added that UK supermarkets will be ‘rightly nervous’ as Amazon wades into the grocery market. 

‘History shows that Amazon doesn’t enter markets lightly, and it doesn’t enter markets to be another player. This is a voraciously ambitious business that wants to dominate every market that it trades in,’ Mr Hyman said.

‘Now it’s not going to dominate the UK grocery market any time soon because there’s rather a lot of players in it already who are actually pretty good at what they do. But I think we shouldn’t be under any doubt that they will capture a material slice of this market.

‘It’s certainly true that when someone with the pockets that are as deep as Amazon enters the market and their existing retail business model doesn’t need to make any profit because they make their profit doing other things, that represents a potential challenge of significant dimensions.’

He added: ‘One of the things we’ve all learned about Amazon over the years is that they are very unconventional and they’re also extraordinarily secretive. So there’s a lot about this that they’ve not told us.’ 

Amazon release their second quarter results on Thursday. Investors who have seen the share price rise by around 60 per cent this year will be hoping for more good news from the technology giant. The surge in Amazon shares saw founder Jeff Bezos add £10billion to his wealth in just one day last week. 

Food delivery has doubled in size to more than 3million orders per week since the start of the pandemic as families avoid crowded spaces and learn to shop online. 

Traditional supermarkets have already seen their market share undercut by German discounters, which hold more than 13 per cent of the UK market, and sellers such as Ocado and Amazon post a threat online. 

Russell Jones, UK country manager for Amazon Fresh, said: ‘It’s a really obvious next step to take. Grocery delivery is one of the fastest growing businesses at Amazon and we think this will be one of the most-loved Prime benefits in the UK.’ 

Tom Brereton, an analyst at Global Data, said: ‘It’s a bold and ambitious move from Amazon.’