Amazon is set to mount a serious challenge to UK supermarkets in 2016 with the expansion of its Amazon Pantry service.
Currently only available to Prime members, the new service which offers over 4000 products to shoppers is set to expand in 2016 – Christopher North, Managing Director of Amazon UK said, “in the New Year we are going to be adding a lot more products.” When asked about the expansion of its Prime Now Chilled and Frozen service he added, “when we believe we have got the offer right, and the economics, we will roll it out internationally” (The Guardian).
Only Prime members in Birmingham, London, Manchester and Newcastle (and surrounding areas) can currently order chilled and frozen products from Amazon via its Prime Now app.
Shelf price analysis
Brand View has analysed Amazon Prime Now pricing since 29 October and compared it to the shelf and promoted price (price including multi-buy promotions) of Asda, Morrisons, Ocado, Sainsbury’s, Tesco and Waitrose at various time intervals in the last few months.
Since the last update (3 December 2015) Morrisons has moved from 18.7 percent more expensive than Amazon, to 9.6 percent more expensive on 7 January 2016 – this is the closest to Amazon in terms of shelf price of any of the retailers. Between 3 December 2015 and 7 January 2016 Morrisons reduced the price of 41 products in the basket.
Waitrose has consistently had the greatest price difference with Amazon of the six retailers throughout the time period. However, between 24 December 2015 and 7 January 2016 it significantly reduced the shelf price of 20 products and was 13.9 percent more expensive than Amazon on 7 January 2016, the second closest of the retailers analysed.
Both Sainsbury’s and Tesco were closer in price to Amazon on 7 January 2016 than they were on 3 December and were third and fifth closest respectively. Asda was 14.2 percent more expensive than Amazon up from 12.7 percent on 3 December 2015. Ocado was also more expensive on 7 January 2016 than 3 December 2015 at 18.1 percent, the greatest price difference with Amazon at this time.
Cheapest retailer by percentage of range
Brand View has analysed which retailers were the cheapest for products listed in both Amazon and at least one other retailer.
On 3 December 2015, Amazon was joint cheapest on 66.7 percent of lines, decreasing to 45 percent on 7 January 2016 – its lowest percentage throughout the analysis.
Some 38.1 percent of products were available at a lower cost on competitor sites than Amazon on 7 January 2016, up from 23.3 percent on 3 December 2015. This was the second highest level seen since the 29 October, just below the 38.5 percent observed on 5 November 2015.
On 3 January 2016, Amazon was the sole cheapest retailer on 16.9 percent of products, up from 10.1 percent on 3 December 2015.
Promoted price analysis
Morrisons made significant promoted price reductions between 24 December 2015 and 7 January 2016 which meant it was 0.8 percent cheaper than Amazon across a representative basket of commonly-listed products. Morrisons reduced the promoted price of 40 products between 24 December 2015 and 7 January.
One of the greatest promoted price differences was on four flavours of Mattessons Fridge Raiders – Morrisons promoted these products on a 2 for £1 deal, whereas Amazon priced the products at £1.
Asda’s promoted pricing was the second closest to Amazon. However, on 7 January 2016 it was 5.5 percent more expensive than Amazon, up for 3.5 percent on 3 December 2015.
Sainsbury’s had the greatest difference in promoted price with Amazon. It was 11.1 percent more expensive on 7 January 2016, down from 11.8 percent on 3 December 2015. It was just behind Ocado which was 10.8 more expensive than Amazon on 7 January 2016.
The expansion of the Amazon Pantry service, and the possible launch of the chilled and frozen Prime Now service on a national scale, will prove a threat to the established supermarkets. Morrisons are offering the greatest challenge to Amazon’s current chilled and frozen offering. Asda also announced its investment of an additional £500 million toward cutting prices on 10 January 2016, so it is unlikely Amazon will have an easy time in this competitive online grocery marketplace (The Independent).
The largest obstacle that Amazon will have to overcome is encouraging shoppers to subscribe to its Prime service. If it can evidence that it can provide the cheapest and most reliable branded grocery delivery service, then perhaps the £79 a year subscription fee will seem reasonable to shoppers.
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