Amazon will sell groceries after confirming a tie-up with Morrisons that is expected to push prices lower.
The online retailer will sell the supermarket’s lines, including own-brand labels, in its first serious push into the British food market.
Analysts said that the deal would be a boost for shoppers, who are already reaping the benefits of a bloody price war between Tesco, Sainsbury’s, Asda and Morrisons.
Amazon will be allowed to set its own prices, potentially leaving it open to further accusations of over-aggressive tactics. Publishers and other industries have previously complained that it has undercut rivals to increase its share of the market.
This strategy of low prices and low margins is highlighted by Amazon reporting worldwide revenues of $108 billion (£76 billion) but relatively paltry profits last year of $1.6 billion.
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John Ibbotson, an analyst at Retail Vision, said: “Tesco could soon be about to find out what it’s like to be David rather than Goliath.”
The lines will be available through Prime Now, Amazon’s one-hour delivery service, and on Amazon Pantry, in which shoppers fill a box with items for a flat delivery fee.
The company appears to have found selling food more difficult than expected. Amazon Fresh, which has been running in the United States for more than five years, has had limited appeal. Bryan Roberts, an analyst at TCC Global, a shopper loyalty business, said: “It hasn’t been an unparalleled success in the US — it’s been fairly patchy. Amazon has been forced to enter a lot of different relationships to try to scrape together a decent grocery offering.”
However, Rickin Thakrar, an analyst at Haitong Investment Bank, said that Amazon Prime could become a serious competitor by delivering quickly to the doorstep. “This is going to be a big game-changer,” he said. “Ocado spent years trying to perfect this model and we have the best online retailer in the world in my opinion undercutting them to some degree by working with someone. People have called Amazon a serial monopolist — they want to be able to sell everything to everyone. That’s what’s happening here. This is going to have ramifications for the industry.”
Amazon Prime members, who pay an annual fee of £79, have been offered packaged food since November.
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It is understood that Morrisons was attracted to Amazon because the chain has built only a small share of the online market and has its own food manufacturing plants. It recently began offering a range of frozen and chilled food to Amazon Prime customers in London.