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Amazon in food delivery deal with supermarket Morrisons

Published 29/02/2016

A deal gives Amazon customers access to Morrisons 'fresh and frozen' products
A deal gives Amazon customers access to Morrisons 'fresh and frozen' products

Online retail giant Amazon has pushed further into the British grocery market by joining forces with supermarket Morrisons.

The company has secured a supply contract with the Big Four grocer, which will see it offering "hundreds" of Morrisons products through its food delivery service Amazon Pantry and its subscriber service Amazon Prime Now.

The deal will give Amazon customers access to Morrisons "fresh and frozen" products, the supermarket said.

Morrisons chief executive David Potts said the combination of the supermarket's "fresh food expertise and Amazon's online and logistics capabilities is compelling".

He added: "This is a low-risk and capital-light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business."

The announcement comes after supermarket Sainsbury's upped the ante in the highly-competitive grocery sector last month when it tabled a £1.3 billion bid for Argos-owner Home Retail Group in an attempt to become a ''world-leading'' retailer bigger than John Lewis and Amazon UK.

But the proposed deal faces competition, with South African-based furniture retailer Steinhoff making a rival offer for Home Retail Group at £1.4 billion.

Amazon heaped more pressure on the British grocery market in November last year when it launched a grocery service for Amazon Prime members with thousands of products.

Amazon Pantry delivers groceries and household products to subscribers for a fee of £2.99 per box.

It comes as the British grocery sector continues to be locked in a supermarket price war, which has seen the Big Four supermarkets slash their prices to protect market share from the rise of German discounters Aldi and Lidl.

Meanwhile, Morrisons also said it was pressing ahead with plans to bolster its website after agreeing a deal in principle with online grocery retailer Ocado.

The supermarket said it would take up space at Ocado's new customer fulfilment centre in Erith, south east London, in a move to "sell to customers all over Great Britain".

It comes after the grocer signed a £170 million contract with Ocado in 2013, providing the Bradford-based supermarket with its first online delivery service.

Morrisons, which runs just under 500 stores, last month reported a 0.2% rise in sales at established stores, excluding fuel, in the nine weeks to January 3 in a marked turnaround after recent hefty sales declines.

It was followed by a fresh drive by the supermarket at the beginning of February to snap up more customers by cutting the prices of more than 1,000 products.

Morrisons shares were up more than 4% in early trading.

Shore Capital analyst Clive Black said the tie-up with Amazon was "potentially quite inspired by David Potts".

He added: "It is highly complementary to the business in its current form. We have heard it said by some that Mr Potts may be more of a retailer than a strategist; such folk may need to think again."

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