Amazon Fresh takes aim at UK grocery market

Amazon is joining the fray in one of the world's most cutthroat grocery markets.

The ecommerce giant said Thursday its Amazon Fresh food delivery business will now be available to users of its Prime membership plan in central and east London, the first time the service has been offered outside the USA.

Customers will be able to order from a catalogue of about 130,000 items, including those of major high street brands as well as independent local producers. Same-day delivery will be available, allowing shoppers to order at lunchtime for a delivery as soon as 5pm the same evening.

"We are launching with a comprehensive offer in a limited area and will take our time to hone and improve our service based on our learnings and feedback from our customers," said Ajay Kavan, vice president of Amazon Fresh. "We will be very methodical and considered in how we roll this service out further in the UK."

After an initial 30-day free trial, the service will cost about £7 per month (€9) on top of the subscription fee to Amazon’s Prime service, currently £79 per year. No additional charge is incurred for orders over £40, but under that threshold shoppers will pay about £4 for delivery.

Delivering groceries in the UK will test Amazon chief executive Jeff Bezos' philosophy of sacrificing profits to keep prices low and build customer loyalty. The Seattle-based company is joining a crowded market of British grocers including Sainsbury, Tesco and internet grocer Ocado Group that have been engaged in a price war for years. The competition has benefited shoppers, but made it difficult for the companies to make money.

Amazon Fresh is hoping for better success than it has found so far in the US, where the service hasn't gained much traction, said Sucharita Mulpuru-Kodali, an analyst with Forrester Research who tracks the retail sector. The delivery service requires a $299 annual subscription fee from customers that many have found not worth the cost, she said. The company hasn't added a new city for fresh grocery delivery in about 18 months.

Still, with a dense and affluent population, London is an enticing market for grocery delivery. According to the research firm Mintel, more than 10 per cent of shoppers get all their groceries delivered to their homes rather than going to a store. The UK market is forecast to be worth £9.8 billion this year and as much as £15 billion by 2020.