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E-commerce

AmazonFresh UK entry ‘overblown’

Retail research firm Conlumino has cast doubt over predictions AmazonFresh will take 3 per cent of the total UK grocery market.

In a white paper published last week, Conlumino said claims that Amazon will take a share of more than 3 per cent of the total UK market (on and offline) are “overblown”. In the US grocery business, AmazonFresh has only been moderately successful, and even in its most established market, Seattle, the service only has a 1.2 per cent share of total grocery spend.

Amazon launched its Fresh grocery delivery service in the UK in June. The service offers Amazon customers grocery delivery within 24 hours. It is available only to Amazon Prime Fresh members. Baskets more than £40 are delivered for free, while baskets below that amount incur an additional £3.99 delivery.

Comparing the performance in the US and the UK, Conlumino said that the successful penetration of AmazonFresh in Seattle, where it is an industry first mover, is unlikely in the UK where Amazon is a latecomer.

“We believe that even a share of 6.1 per cent of online grocery, which AmazonFresh manages to attain in New York, is unlikely in the areas Amazon serves in the UK – mostly because the UK market is more mature and competitive than it is in the US,” said the firm.

Conlumino also said getting existing customers in the UK to switch to AmazonFresh has been a challenge. Despite this, AmazonFresh is still expected to be disruptive.

“We sound two notes of caution for existing UK players. First, unlike the US the UK market is already concentrated and the general trend is one of fragmentation; this could play into Amazon’s hands. Second, as a more developed online market UK consumers are generally more experimental and willing to try new propositions.

“As much as AmazonFresh may struggle to build a high level of market share, we believe that it still has the potential to be highly disruptive and to damage the profitability of some players which, because of low margins, is very sensitive to even small shifts in volumes.

“Amazon has helped raised the bar in the US where, subject to availability, same day delivery is now fairly common. Over the medium term we believe that AmazonFresh will also raise this bar in the UK and that other grocers will become more competitive on delivery – something that may not be helpful to margins.”

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