The deal means millions of Amazon’s Prime customers will now have access to free same-day deliveries for the FTSE 100 grocer’s products on orders over £40. It also expands an existing relationship between the two firms that has existed since 2016, when Morrisons began to sell wholesale fresh, chilled and frozen groceries on Amazon’s website.
While Morrisons has previously offered same-day delivery through the Prime app, the move to the main website offers exposure to millions of new potential customers. It will also offer shoppers access to the grocer’s entire product range rather than a previously limited selection.
The partnership will begin in Leeds with the goal of rolling out the capability to more customers across the UK in the coming weeks.
The deal also accompanies Morrison’s contract with grocery delivery firm Ocado Group PLC (LON:OCDO), which is also due to begin a similar partnership with high street stalwart Marks & Spencer Group PLC (LON:MKS) next month.
The tie-up with Morrison’s also advances Amazon’s bid to muscle its way into the UK’s grocery sector and add more subscribers to its Prime offering, considered a key element of the corporation’s continued growth. However, the group’s incursions have begun to flash warning lights across the cutthroat sector, which is already locked in a fierce battle over market share as more and more shoppers look online for their grocery needs following sharp uptake during the UK’s pandemic lockdown.
“The development of the relationship with Morrisons represents a notable step forward for Amazon in its grocery activities in the UK in our view, following on from the recent announcement to offer no additional charge for grocery delivery to Prime members. For Morrison we see this development as a complementary move that deepens its online penetration of the UK online grocery market in a capital light manner”, analysts at broker Shore Capital said in a note.
ShoreCap also said the tie-up “potentially expands the reach of the brand to households where there have not been traditional Morrison shoppers perhaps, most notably maybe in relatively under-represented postcodes in Great Britain”, and as such could also prove an incremental benefit to the supermarket’s offline and own-website operations.
“We would not expect to see much discernible evidence in the Group’s top-line in the very near-term, Morrison reports interim results for [financial year 2021] on the 10th September 2020, but in due course this tie-up may yet prove to be a more notable component of the supermarket’s online activities; it may also take Amazon UK a few steps forward in the British grocery market too. All in all, we believe this is a welcome development for Morrison shareholders”, ShoreCap concluded.
Shares in Morrisons were 1.6% higher at 199.3p in lunchtime trading, while Amazon shares in New York were up 0.3% at US$3,323 in pre-market trading.