Business

Amazon, Morrisons strike online UK groceries deal

The companies have inked a deal in a move which will make traditional sellers of fresh and frozen food examine their own businesses.

Written by Charlie Osborne, Contributing Writer Feb. 29, 2016 at 3:21 a.m. PT

UK supermarket chain Morrisons and Amazon have signed an agreement which will bring fresh and frozen food to Amazon Prime and Pantry subscribers in the United Kingdom.

Grocery shopping is big business in the UK. In the last decade, supermarkets including Tesco and Asda have not only maintained large physical stores but now also offer online delivery services. However, convenience is king -- and combining Amazon with frequent grocery shops is likely to become a thorn in the side of other retailers.

Amazon is set to enter the grocery market in the United Kingdom through the deal, which gives Morrisons the option to sell food products through Amazon's Prime member platform.

In a press release, Morrisons called the deal a "new supply agreement" which would give Amazon customers access to ambient, fresh and frozen products.

Morrisons will act as a wholesaler for the e-commerce giant, which will, in turn, stock hundreds of Morrison products for Amazon Prime and Amazon Pantry customers.

Amazon already offers grocery items through third-party retailers on the platform, but took things a step further in November with the launch of a package deal for Prime members. Amazon Pantry is also picking up traction as a convenient way to purchase household goods, with delivery cost based on the amount of boxes required to fulfil orders.

By bringing Morrisons into the fray, Amazon will be able to offer a wider range of perishable items through its platform, and potentially one day compete against rival supermarkets across the UK for their digital custom.

Morrisons CEO David Potts commented:

"Today's agreement is built on Morrisons unique strengths as a food maker. The combination of our fresh food expertise with Amazon's online and logistics capabilities is compelling.
This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months."

Morrisons is the UK's fourth biggest supermarket, trailing behind Tesco, Sainsbury and Asda. The move may be low risk, but also a move which highlights how today's consumer patterns and retail habits are changing.

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The company may not be able to compete purely based on physical outlets, but by becoming more established in the online supermarket game, the company can begin to chip away at rival companies by taking away online customers -- especially if logistics and delivery costs can be slashed.

If you give online customers a better price for goods that they buy on a frequent basis, you can peel away loyalty to other firms.

While a number of supermarkets have launched online delivery services, deals with companies such as Amazon may be the step forward to further grow this sector. If the more traditional supermarket is going to stay ahead of the game, they too may be forced to invest more heavily in online purchase options.

Amazon already offers fresh items through the Amazon Fresh service in the United States, alongside Google which is testing a same-day delivery service for groceries.