Following the news that online retailer Amazon is to sell food and drink in the UK for the first time, Verdict analyst Joe Robinson says it’s highly unlikely to impact the UK food and grocery market in its current incarnation.
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 loyalty in a market where such attributes are imperative.
Its announcement comes at a “far from ideal time” for rival Ocado, which is on the verge of a IPO, hoping to raise approximately £200m to fund the next stage of its expansion.
While Ocado currently has a significant competitive advantage over Amazon, owing largely to its innovative and efficient fulfilment operations, customer loyalty and quality credentials, Amazon, with its huge resources, is likely to seek to erode this competitive gap in the long term.
The long-term potential of Amazon’s food and grocery offer is likely to be in developing a reputation for bulk and niche purchases and offering a platform for smaller food and grocery suppliers, rather than cultivating a significant share of the UK food and grocery market.
Source: Verdict
