As Amazon Fresh launches in London, does it pose a real threat to UK supermarkets?

Amazon hopes to profit from connecting small suppliers with consumers (Source: Getty)

Fraser McKevitt, head of retail and consumer insight at Kantar Worldpanel, says Yes.

The last thing that the traditional British supermarkets want is another challenge to their model – they’re still busy fending off the shock of Aldi and Lidl’s sharp pricing model. Online grocery sales are growing well ahead of the overall market, so it’s understandable that Amazon wants a piece of the pie. Even if it does not reach a critical mass quickly, competitors will be feeling the pressure to match the low pricing, fast delivery and links with premium independent retailers that Amazon can offer – none of which will help their profits. Yes, for now Amazon Fresh will be limited in scale. Its target market – those Amazon Prime members willing to pay another £6.99 a month – is narrow and success isn’t guaranteed. But you would not want to bet against it – Amazon can afford to take the risk and online delivery is a logistical challenge it is well placed to overcome. It’s just doing it profitably which will be considerably harder.

Clive Black, head of research at Shore Capital, says No.

After much hullabaloo, Cockneys can now order from Amazon Fresh. The new service has gone live in 69 postcodes in Central and East London. It is a notable event and one that, in many years to come, may prove to be a threshold announcement. While so, Amazon is a player in what is little more than 5 per cent of the UK grocery market at present, and it will take some years if it is to register on the market share Richter scale. While a serious new entrant with a big balance sheet and time, there are simply more important matters for the incumbent players to ponder and deal with – most notably deflation, the discounters, the pricing environment and making superstores more relevant. Yet with the new supply of stores turned off and population and economic growth to come, we believe that all the trade can do fine. In the shorter term, however, Amazon Fresh is bad news for Ocado and good news for Morrison.

City A.M.'s opinion pages are a place for thought-provoking views and debate. These views are not necessarily shared by City A.M.

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