When news arrived that Amazon Pantry was launching with a few thousand non-perishable grocery offerings available for delivery and a £3 fee, it was just the opening salvo. One review had Amazon beating its UK supermarket rivals on price. No surprise there, perhaps.
The tech giant waited until mid-2016 for its UK launch of Amazon Fresh. Starting with London, its Prime customers get a fairly vast gamut of groceries supplemented by local offerings like Gail’s and Paxton & Whitfield. Entering a Central London postcode triggers its website to display a banner touting same-day delivery of anything in the range if you order before 8 a.m.
Already under threat
What is not news is how competitive the UK supermarket landscape is. Catering to a fickle, budget-conscious public, the likes of Tesco, Sainsburys, Asda and Waitrose respond to the pressures that start in the home, and they in turn put heat on the farmers. Margins were already thin, so when German discounter Lidl announced a UK-wide marketing campaign in 2014, their forecast expansion of as many as fifteen hundred stores must have induced a headache or two.
The grocery business in the UK, then, is not for the faint-hearted – an epithet that could scarcely be applied to Amazon, who recently announced its $13.7 billion purchase of Whole Foods.
Discounters not the real threat?
Writing for the Grocer, David Sables looks past cut-price German entrants Lidl and Aldi and towards the algorithms that are used to set lower prices nationally: ‘It’s not the discounters who are bleeding the industry of margin, it’s Amazon. Spare a thought for the buyers. You have years of experience managing your range and display to a set of shelves but your competition has no shelves.’
Benefit to suppliers or producers?
So if the Whole Foods acquisition is the game-changer that observers claim, who stands to benefit other than the shareholders?
It depends on whom you ask. For food retail workers, the future isn’t bright. By 2025, predicts the British Retail Consortium, upwards of a million jobs could be gone as groceries go digital.
For small businesses with unique wares, they may have to find the sweet spot. Canvassing locals in Austin, Texas, where Whole Foods is headquartered, the Guardian weighs the pros and cons: Huge corporations might have the potential to destroy small businesses – but their heft can also create conditions where boutique retailers can flourish.
Beat ‘em or join ‘em
Amazon’s largest non-US deal was with Morrisons, as Britain’s fourth-largest supermarket chain conspired with the tech giant (a few months before the Fresh launch) to deliver groceries on demand. In an already competitive market, local shops would scarcely have welcomed the increased erosion of their customer base.
Lidl, meanwhile, is opening in the US …