AmazonFresh cranks up pressure on British supermarkets

Thu Jun 9, 2016 8:30am EDT
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By James Davey

LONDON (Reuters) - Amazon (AMZN.O: Quote) has launched a British version of its U.S. AmazonFresh food delivery service, stepping up the pressure on the traditional big supermarkets already locked in a brutal price war.

In a long-anticipated move to break into Britain's 178 billion pounds ($257 billion) grocery market, the world's largest online retailer launched AmazonFresh on Thursday in parts of central and east London.

Britain has one of the world's most developed online grocery markets with the big four retailers Tesco (TSCO.L: Quote), Sainsbury's (SBRY.L: Quote), Wal-Mart's (WMT.N: Quote) Asda and Morrisons (MRW.L: Quote) already competing with specialist delivery firm Ocado (OCDO.L: Quote).

The online grocery bar is even higher in the capital.

"The entry of AmazonFresh into the UK doesn't come out of the blue but it will further worry investors about the fundamentals and prospects of the UK food retail market," said Bernstein analysts, who estimate Amazon could eventually take up to 13 percent of all food sales in the country.

Britain's online food market is expected to nearly double to 17.2 billion pounds in the five years to 2020, according to industry research group IGD.

"We are launching with a comprehensive offer in a limited area and will take our time to hone and improve our service," AmazonFresh vice president Ajay Kavan said.

AmazonFresh will initially offer a full grocery service from a distribution center in the east of the capital. It plans to use small and medium-sized external carriers for deliveries, which could be on the same day as the order.   Continued...

Amazon boxes are seen stacked for delivery in the Manhattan borough of New York City, January 29, 2016. REUTERS/Mike Segar/File Photo