It’s well-known in financial and investment circles that online food shopping isn’t the British supermarket’s most profitable activity. So why do Amazon think they can do better by offering Morrison supermarket’s full range on its website?
Perhaps that’s why the tech giant is testing the model by launching its new Morrisons on Amazon service to operate only in Leeds initially. Their model for these online orders is that they won’t be picked from a warehouse but directly from its stores. And that’s very different from its typical model that involves building new or redeveloping existing massive warehouses near transport hubs and picking, packing and delivering from those. This is of course where savings can be made for Amazon because they won’t have to incur significant initial capital costs for buildings and logistics.
However, where Amazon have a significant strategic advantage for shoppers is their free Amazon Prime same-day and next-day delivery service. It’s free and it’s fast. Two criteria that the UK population have appreciated during the recent country-wide lockdown when UK online grocery sales surged up to 13% from 7.4%. And that’s even without a food shopping service from a major food retailing player like Morrisons.
During lockdown when food shopping spending increased significantly there were scenes of people panic buying, forming long socially distanced queues, and online portals for supermarkets Being overwhelmed and not being able to accommodate the additional demand for home deliveries. This is where Amazon has a massive advantage as it already has a flexible home delivery infrastructure that it can scale at short notice.
Will it be this that gives it the advantage? The results of its test in Leeds will be the first part of the story. But not the last.