Online shopping leviathan Amazon launched its first physical store and first grocery store outside of the US in Ealing, West London on 4 March 2021. Sized at 2,500 square feet, the store is branded Amazon Fresh, but it uses the ‘Just Walk Out’ technology seen in Amazon Go stores across the pond.

Overhead cameras, weight sensors and deep learning technology detect the merchandise shoppers take from or return to shelves and track the items selected in a virtual cart. The system automatically debits customers’ Amazon accounts when they exit the store and sends a receipt to the Amazon mobile app.

Though the arrival of Amazon Fresh could have seismic implications over the long haul, Shares believes the incumbent supermarkets will be keeping close tabs on Amazon’s first UK checkout-free grocery store rather than quaking in their boots, at least for the time being.

Amazon has been slowly building its online service in the UK through a collaboration with Morrisons (MRW) and its investment in the rapid delivery channel through Deliveroo, though the launch of a new ‘by Amazon’ private label at Ealing and a further tranche of 25 to 30 Amazon Fresh outlets to follow do showcase serious ambitions.

LIMITED IMMEDIATE IMPACT

Nevertheless, the direct impact on UK supermarkets is likely to be minimal in the medium term. Building meaningful market share in grocery is a long-term game and even in the US, Amazon has only established 33 physical grocery stores (excluding Whole Foods) and ‘the ripples from them have been slight’, to quote Coresight Research CEO and founder Deborah Weinswig.

UK supermarket shareholders may be excited by the view of Shore Capital, which says ‘the significance of this move to us is that if it works, it will be another step in Amazon eventually taking a major place in the British supermarket industry through an acquisition’.

Amazon’s eventual quarry ‘may be many from Tesco (TSCO) to Booth’s, the latter of which also trades with Amazon, albeit the strongest commercial relations if current game-theory is applied would lead one to suggest Morrisons’, says the broker; Morrisons already has a partnership with Amazon and is a supplier to the newly opened Amazon Fresh.

For British supermarkets, ‘the thought of Amazon opening a store and building a presence in the UK is nothing new and the stock market has had time to digest such a situation,’ commented Shore Capital on Amazon Fresh launch day (4 March). ‘Come the day that Amazon makes a more defined strategic move, however, the waves maybe greater as we see it as the key additional player over the next few years, noting that it is not an entry price discount player.’

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