In a new groundbreaking deal, Amazon is going to start selling food from one of Britain’s biggest supermarkets. Customers can now buy fresh, chilled, and frozen food from Morrisons within the next few months. Online grocery sales have been increasing in the last year. The growth has been phenomenal. As per retail analysts, Amazon’s entry to the fresh food market will lead to a further shake-up of grocery shopping. Retail stores are already coping with the falling sales.
A new deal by Amazon will lead to a huge change in business scenario
John Ibbotson, a consultant at retail vision said, “Tesco could soon be about to find out what it’s like to be David rather than Goliath. The only winner is the consumer. The big four are fighting back with click-and-collect, but who will want that if Amazon delivers to your door in one hour? This deal is the final link in the chain for Amazon to launch Amazon Pantry and take on the big four by delivering a full grocery offer including fresh and frozen food.” The online giant offers a great range of frozen foods and chilled food products. A list has not been decided on, but it includes orange juice, chocolate, spaghetti, and soup.
Amazon has complete freedom to decide which food items to choose. They decide on what Morrison products will be sold through their chain and also the price offered to customers. The agreement is a standard wholesale deal between Amazon and Morrison, as they act as the retailer and supplier respectively. There are, however, no chances of Amazon offering a significantly low price. This will lead to issues, and Morrison could simply drop the deal then and there.
Both the companies unleash a great earning potential
David Potts, chief executive of Morrisons, says “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 are compelling.” The deal had highly positive effects. Morrisons’ share rose by almost six percent after the deal was revealed. Bruno Monteyne, who works as an analyst at investment bank Bernstein, gave an insight regarding this. “Morrisons may feel that Amazon isn’t really a threat for its smaller stores in the north of England. On the contrary. On our recent store visit, we saw a nice new shiny Amazon locker unit for picking up Amazon parcels. This would be a convenient divide-and-conquer outcome, where Amazon and Morrisons specialize where they are best and support each other mutually,” said Monteyne, explaining the scenario.
But Monteyne also shared the negative consequences that will need redressal in future. He believes that this will give Amazon a huge share in the U.K. retail market. “Letting the Barbarians in is the other potential long-term outcome. Having a credible fresh food supply in the U.K. will allow Amazon to build scale and expertise and really make an impact on the U.K. food retail market,” added Monteyne. But everybody looks towards this as a revolutionary step that will set a new trend. Duncan Tatton-Brown, Ocado’s finance director, said, “I think it is encouraging. Anything that helps to grow online grocery shopping is a good thing. We look forward to the future with optimism.”