Amazon signs “game-changing” deal with Morrisons

Today Morrisons announced that it will supply groceries to Amazon customers in the UK under a new deal with the US online giant.

The supermarket – the smallest of the “big four” multiples, with a share of the online grocery market of less than 3% –  said it will supply products for the Amazon Prime Now and Amazon Pantry services.

Amazon Pantry was launched in the UK last year, escalating competition with the big four, but did not offer fresh food. Under the new deal, Morrisons will supply fresh, frozen and non-perishable goods to Amazon customers.

The service will be available later this year.

Ocado has a 25-year agreement with Morrisons to run the supermarket’s online delivery service, but at the time of writing it was not known how this deal would be affected with the new agreement (although Ocado shares plummeted upon news of the deal, and sales in Sainsbury’s and Tesco were also affected).

The supermarket also said it will expand the geographical coverage of Morrisons.com by taking space in Ocado’s distribution centre in Erith, South-East London.

However, Morrisons said of the Erith deal: “This amended agreement is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online. There can be no certainty that an agreement will be concluded.”

Amazon currently has a small food delivery business but it has long had ambitions to grab a share of the UK grocery market and this tie-up is seen by observers an important step in realising them.

Morrisons will also gain an important new channel for its food manufacturing business and will at a stroke essentially become a food wholesaler to Amazon, which may make the wholesale industry sit up and take notice.

 

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