Morrizon: Amazon and Morrison partner to offer online grocery deliveries

September 16, 2020

2 min read

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What's going on here?

Morrisons and Amazon have announced a new supply agreement which will make Morrisons’ products available to Amazon Prime Now and Amazon Pantry customers.

What does this mean?

Morrisons will provide a wholesale supply service to Amazon, which expands their same-day online grocery delivery service to cover most of London and more cities across the UK. In March 2020 the service operated from 17 Morrisons stores in eight cities across the UK including Manchester, Birmingham and Glasgow.

What's the big picture effect?

COVID-19 has accelerated many trends in retail. Data from a Waitrose survey of 2,000 nationally representative adults, found that 77% of people now do at least some of their grocery shopping online, up from 61% last year. It also found that approximately 60% of people have shopped online for groceries more frequently since the pandemic, with 41% of respondents citing convenience as the reason. One in five stated that they had not considered online shopping prior to the pandemic.

As consumer trends shift, big supermarket chains have adapted to meet this new increase in online demand. The UK’s largest supermarket chain, Tesco, announced in August 2020 that it would create an additional 16,000 permanent jobs to support the exceptional growth in its online business.

The Amazon deal places Morrisons in a very unique position. Morrisons now has direct access to over 15 million Amazon Prime customers in the UK, assuming there is continued expansion of the service worldwide. This will strengthen their position against competitors as the continued growth of Amazon will enable further consolidation of the market as Amazon becomes a one stop shop for all consumer needs.

The deal also intensifies the pressure on Amazon’s competitor Walmart to offload their stake in the underperforming Asda, which it has owned since 1999. In Q2 2020, same-store sales of the UK’s third largest supermarket rose just under 4%, excluding fuel. Online sales did double, but Morrisons’ digital business is still accelerating faster. This may have hardened Walmart’s resolve to sell Asda. Walmart has put the UK subsidiary back on the market and private equity groups are circling. A £7bn price has been mooted on the basis that Walmart would keep a minority stake.

The timing of the deal is also very interesting, as Waitrose’s long-standing deal with Ocado will soon end. This will see a shift in partnership with Waitrose going in a separate direction paving the way for a partnership between Marks & Spencer and Ocado, meaning Marks & Spencer will finally enter the online market. 

On the whole, the deal between Morrisons and Amazon, provides another element to the competition in the UK’s supermarket sector. The strength of this partnership is likely to shake things up between the traditional big four supermarkets in the UK. One final thing to consider is the growing force of Amazon in this sector. Is this partnership just a stepping stone for Amazon to procure consumers to their platform, with an intention to make a play on their own in the coming years?

Report written by Kasey Cummings

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