Amazon and Morrisons announce new supply arrangement
UK supermarket Morrisons and Amazon have announced a new supply arrangement, whereby Morrisons products will be available to Amazon Prime Now and Amazon Pantry customers. In a statement issued today (29 February), Morrisons said: “Morrisons will provide a wholesale supply service to Amazon, allowing Amazon’s customers access to a wide range of Morrisons ambient, fresh and frozen products.”
David Potts, the Chief Executive of Morrisons, commented: “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 is compelling.
“This is a low risk and capital light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”
This is an interesting development – as Amazon has been ramping up its food and grocery delivery services in the UK and there have been market rumours that the e-commerce giant was preparing some sort of tie-up with Ocado, the “online supermarket” which offers its own product ranges and has a supply arrangement with Morrisons.
In today’s statement about the Amazon deal, Morrisons also said that it has reached an “agreement in principle” with Ocado to grow Morrisons.com.
The statement added: “This involves Morrisons taking space in Ocado’s new Customer Fulfilment Centre (CFC) in Erith, and Ocado delivering a store pick solution for Morrisons that leverages Ocado’s technology and Morrisons store assets. When implemented, this would enable Morrisons.com, working with Ocado, to sell to customers all over Great Britain.”
So, Morrisons will be working with both Amazon and Ocado to build its online food and grocery sales.
Industry observers believe that the new arrangements will give Amazon a significant opportunity to boost its Prime Now and Pantry services.
ParcelHero’s Head of Consumer Research, David Jinks, commented: ‘Amazon’s strategy is to use deliveries to win long-term loyalty from shoppers; luring its customers into its Prime service through free deliveries. The large scale expansion of its Prime Now food service will tempt many more customers to lock in to Prime Membership.’
Jinks added: ‘Our research shows Amazon’s Prime members shop 50% more frequently with the company than non-members and spend an average of £1,000 a year, as opposed to £450 a year for non-members. For consumers who have so far resisted the allure of Prime membership, this huge potential expansion of its food delivery service may prove to be just the hook Amazon needs. And Amazon is also offering exclusive deals for Prime Members on its Pantry service; so it really is a joined up approach.’
There has also been speculation on how the news will impact the UK’s intensely competitive supermarket sector.
Hannah Maundrell, editor in chief at www.money.co.uk, told Post&Parcel: “Rumours that Amazon are stepping into the grocery delivery space have been rife for a while. It’s interesting they’ve chosen Morrison as a partner – an astute move for them given the supermarket chain has not had an easy ride.
“It’ll be interesting to see how the price point differs as Morrisons have been angling themselves as a budget brand for some time, which could be why Amazon have chosen them over others.
“Online shoppers are bound to benefit from even lower prices, with more competitors the supermarkets will be doing everything they can to keep their digital customers clicking and will need to act quickly to position themselves as true contenders against the king of online retail, Amazon.”
