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Has Amazon Prime Now been undercutting grocery retailers?

By Chris Elliott

Brand View has compared the pricing of chilled, dairy and frozen products on the Amazon Prime Now App to the shelf and promoted price of the UK’s major supermarkets for the last six weeks. Each week new products have been listed and some products were unavailable, so we’ve created a basket of the consistently commonly-listed SKUs, however there are variances week to week. The Amazon product range and pricing in the analysis is from the Birmingham trial, as this was the first region to trial the new Prime Now service.

Shelf price analysis

Since last week, Amazon has slightly increased its Prime Now chilled and frozen range from 198 (127 Chilled, 71 Frozen) to 204 (131 Chilled, 73 Frozen).

Amazon is now sole or joint cheapest on 162 of 204 products (79.4 percent) up from 72.2 percent last week.

Amazon changed the price of 33 products; 17 of these changes were price increases and 16 were price decreases.

Morrisons moved from closest to Amazon’s pricing last week to fifth closest this week. Last week it was 11.8 percent more expensive than Amazon, but has since moved to 18.7 percent this week. The greater price difference is due to Morrisons ending a number of promotions. The end of promotions on Häagen-Dazs Ice Cream 500ml and Goodfellas Thin Crust Pizza on 30 November contributed most significantly to this rise.

Asda is now the closest to Amazon’s shelf price at 12.7 percent more expensive. Sainsbury’s is second closest at 15.1 percent – its pricing difference with Amazon has reduced every week since 12 November.

amazon prime now pricing difference

Promoted Price analysis

In previous analysis Brand View has compared Amazon Prime Now pricing to retailers’ shelf price – this is the price that a shopper would pay for a single item at a point in time.

We have then reviewed the promoted price, which differs from the shelf price as it accounts for multibuy promotions leading to a representative price for products e.g. 2 for £4 equals £2 per product.

When reviewing the promoted price (price including multibuy promotions) Asda remained Amazon’s closest competitor – this week, Asda is just 3.5 percent more expensive. Looking at the promoted price, Ocado is the second closest competitor at 6 percent more expensive, whereas it is third closest when comparing shelf price.

Sainsbury’s consistently had the greatest price difference with Amazon throughout the six weeks for the basket analysed when using the promoted price. This highlights that the other retailers had a greater focus on multibuy promotions on the products in this basket compared to Sainsbury’s.

Total basket price analysis

Morrisons came the closest to beating Amazon’s price for the total basket – on 6 November it was just 1.1 percent more expensive than Amazon and just 1.8 percent more expensive the following week. The gap in pricing has since become greater as key promotions have ended.

amazon prime now promoted price versus competitor retailers

Shelf price and promoted price both showed noticeable spikes on 19 November when the price gap to all retailers, except Sainsbury’s, widened from Amazon Prime Now pricing.

Amazon Prime Basket analysis

In the last six weeks, Amazon had 127 products that were continually available to purchase every week. The remaining Amazon products were unavailable to order at least once in the last six weeks and therefore excluded from this 127 product basket. Brand View has tracked the products that were always available to shoppers.

The total Amazon Prime Now basket price was lowest on 19 November at £195.42 – a 3.4 percent decrease from the week before.

The fall in total basket price was driven by a 5 percent decrease in price of the Chilled category. The greatest price decrease in this category was the Lurpak Spreadable Lighter Slightly Salted Tub 500g which fell from £3.25 to £1.80.

On 12 November all the retailers had a £3.25 shelf price for the Lurpak Spreadable Lighter Slightly Salted Tub 500g. However Morrisons, Ocado and Sainsbury’s all had the product on a 2 for £4 promotion. The decrease to £1.80 by Amazon could be seen as a move to undercut these retailers.

amazon prime now basket price

Brand View has compared Amazon Prime Now pricing to the shelf pricing of its rival retailers on products which are listed in both Amazon and at least one other retailer. We have then categorised this into three categories as a percentage of the product range:

  • Amazon sole cheapest retailer
  • Amazon joint cheapest retailer
  • Other retailer(s) are cheaper

Across the six weeks Amazon was the joint cheapest retailer on 54.5 percent of products, compared to just 14.2 percent as the sole cheapest retailer. On 3 December Amazon was joint cheapest retailer on 66.7 percent of products.

On 19 November, Amazon was not only the sole cheapest retailer for the total basket, but also had the greatest percentage of its range as the sole cheapest retailer at 20.5 percent. It has fallen every week since this date to 10.1 percent on 3 December.

cheapest retailer by percentage of range

With Amazon joint cheapest retailer for more than half of its chilled and frozen product range (when at least one other retailer lists the product) it is clear that an element of its pricing strategy is to match the cheapest retailer. This strategy creates a large shelf pricing differential with competitors when considering the total basket.

When looking at the promoted price, the difference between Amazon and the other retailers is significantly less, with Morrisons just 1.1 percent more expensive on 5 November. We have seen that Amazon does appear to be considering the promoted price of other retailers. However, Amazon might wish to keep a closer eye on Asda and Morrisons as their multibuy promotions have come close to beating it on price on a few occasions in the last six weeks.

Actionable Intelligence

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