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Amazon Will Aggressively Expand Grocery Delivery Just for Kicks (And Money)

Unlike supermarkets, grocers, and restaurants offering groceries through the pandemic, it doesn’t need to make a profit

Amazon Fresh will deliver more groceries in the UK
Amazon wants to make grocery delivery prime
Monika Skolimowska/picture alliance via Getty Images

Jeff Bezos wants another source of money to add to his money, and he’s found one in the U.K.: Grocery delivery. Amazon intends to aggressively expand into the online grocery delivery market by the end of 2020, according to the BBC, and will start by making its “Fresh” grocery deliveries free over £40. Amazon Fresh is, however, a “Prime” benefit, which requires a £79 annual subscription for access.

While Amazon launched the food delivery service in 2016, its limited geographical scope, limited existing customer base, and lo-fi approach to letting people know it even existed has left it a blip on the U.K. grocery landscape. It’s true that COVID-19 has remapped that terrain — searches for “Amazon grocery” spiked as supermarket delivery slots became the most precious of commodities in late March and through April — but the thing is, Amazon doesn’t care.

Unlike supermarkets, grocers, corner shops, and the restaurant suppliers and actual restaurants that leveraged delivery in the last few months, Amazon Fresh has no need to make money in its new marketplace, while online grocery services are more expensive than in-store shopping for all of those competitors. In being a Prime-accessed service for which customers are already paying a premium, it is also steering itself away from value competition with supermarkets like Tesco, Aldi, and Lidl that would likely be a losing game, while using its fabled safety flouting and worker-exploiting “last mile” logistics to beat supermarkets at a game they can’t win: Same-day, or even same-few-hours delivery is still a minority pursuit for the country’s biggest supermarkets. Overall, it’s very unlikely that this will moderately, let alone seismically change the U.K. supermarket market, but it will create a thorn in a few supermarkets’ side while giving Amazon a faster-flowing revenue stream.

The expansion, which apparently aims to cover multiple U.K. cities by the end of the year, will also bring it into minor competition with Deliveroo, which offers same-hour grocery delivery from a small number of supermarkets and convenience stores in London. Amazon is currently in the final stages of completing on a 16 percent stake in the company, with its future plans apparently also scrutinised by the Competition and Markets Authority while deciding whether to allow the £450 million deal. Responding to the CMA’s provisional approval of that deal earlier this month, Amazon said the findings “do not recognize the Parties’ fundamentally different grocery propositions.” Expanding its short-order model like this could, it seems, run counter to that claim. Deliveroo also criticised the CMA for its “hypothetical Online Convenience Grocery (OCG)” category, which the body used to compare the two companies; that no longer seems so hypothetical.

With online grocery retail set to grow by over 75 percent, reaching to £19.5 billion in sales in 2020, it seems a low-risk move for a company with Jeff Bezos’ pockets at its disposal.