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Grocers braced as Amazon trials one-hour deliveries

Amazon’s trial of one-hour chilled food deliveries could prove hugely disruptive for an already ultra-competitive grocery sector, reports Retail Week.

Order Dynamics chief scientist Michael Ross calls Amazon’s move “another disruptive salvo that ups the competitive bar”, a view Sainsbury’s boss Mike Coupe agrees with.

“It raises the bar on whatever we do,” said Mr Coupe. “Ultimately competition is a good thing. If the demand is there then I would imagine that not just ourselves, but a number of our competitors, will respond to it [one-hour deliveries]”.

“These things are possible, but there is a cost associated with them and you have to look at that.”

Kantar Retail’s senior vice president and knowledge officer Bryan Roberts says that during his conversations with the grocers they have highlighted how Amazon’s spending might give it the edge in trialling new initiatives.

“Their main concern is Amazon’s lack of financial constraint – they have money to burn in terms of testing new things out,” says Roberts.
Limited range

Mr Coupe has dismissed the impact of the Amazon trial on the Sainsbury’s business by highlighting the limited range of Amazon’s products.

Birmingham residents with an Amazon Prime subscription are able to order around 50 chilled products for one-hour delivery.

It is understood the move is Amazon flexing its muscles as it seeks to test its supply chain ahead of a UK launch in February of Amazon Fresh, the online grocery service it has launched in the US.

“We have a very significant breadth of offer and that is many, many times greater,” says Coupe.

Stephen Mader, retail insights director for Kantar Retail, says Amazon has adapted its traditional launch strategy for its entry into the UK’s online grocery market.

Instead of launching Amazon Fresh before the introduction of one-hour deliveries, the strategy it pursued in the US, in the UK Amazon chose to launch its Prime Now one-hour delivery service first.

“The thing that is very unique to Prime Now is the one-hour delivery, that is something most other retailers’ cannot compete against because they don’t have the logistics,” says Mader.

In the US, Amazon Fresh customers are required to pay $200 a year on top of their Prime subscriptions for delivery, but it is not yet clear if Amazon will charge UK customers an additional fee when it extends its grocery offer.

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