Amazon launches online grocery store

Amazon has today started selling food and drink for the first time in the UK, challenging online supermarket Ocado as it prepares to push ahead with its stock market flotation.  

Online retailer Amazon.co.uk, which is better known for selling books and electronics, now offers customers a choice of 22,000 household brands, including Walkers, Pampers and Pepsi. Ocado, which delivers Waitrose and John Lewis groceries, offers a slightly smaller range.

Amazon is also offering customers free delivery. However, unlike its new rival, Amazon does not offer a ‘shopping list’ facility which allows customers to order the same goods each week without selecting each product individually again. Customers are also unable to book a specific delivery slot, and some products may only be sold in bulk.

James Leeson, director of grocery at Amazon.co.uk Ltd, said: ‘Amazon.co.uk’s aim is to be the place where customers can find and discover any product they want to buy online’.

‘With unlimited virtual shelf space customers can choose from a wide variety of products, all of which benefit from free delivery. We will work tirelessly to increase the selection of grocery items available to be delivered directly to customers' doors’.

Meanwhile Ocado is pushing ahead with its planned stock market flotation, seeking a valuation of more than £1 billion despite never having made a profit. The company will begin trading on 26 July and is looking to sell shares between 200 pence and 275 pence.

According to the Institute of Grocery Distribution, the top online grocery retailer is currently Tesco, which is expected to double over the next five years from £3.7 billion to £7.2 billion.

Gavin Rothwell, UK research manager at IGD, said: 'This move provides Amazon with an opportunity to leverage its tremendous online brand strength in a new market. Its established model in non-food gives Amazon scope to provide an effective route to market for certain grocery product categories'.

However, according to research company Verdict, Amazon is biting off more than it can chew.

Joe Robinson, an analyst at Verdict, said: 'In addition to short term issues such as lack of website functionality and inflexibility in its delivery options, it faces a monumental challenge to build brand trust and, more importantly, loyalty in a market where such attributes are imperative'.

'The long term potential of Amazon’s food & grocery offer is likely to be in developing a reputation for bulk and niche purchases and offering a platform for smaller food & grocery suppliers rather than cultivating a significant share of the UK food & grocery market,' he added.

Citywire put the new Amazon grocey store to the test - click here to read what we thought .