Last week, Amazon announced it was selling a selection of chilled food products in Birmingham through its Prime Now service as it reportedly gears up for a full launch of Amazon Fresh in the UK early next year.
The service is only available to members of Amazon Prime, which costs £79 a year to join, and offers one-hour delivery on a large range of items.
Commenting on the test launch, an Amazon spokesman said: “Prime Now customers already benefit from ultra-fast delivery on everything from essentials like bottled water, coffee and nappies. We are excited to be adding a range of chilled and frozen items to this selection as we continue to expand the number and variety of products that can be ordered for delivery within 60 minutes.”
While Amazon Prime Now currently has a limited assortment of chilled food products (just under 50 items are available), its one-hour delivery is unique in the market. Goodfella’s pizzas and Haagen Daaz ice cream are just some of the items that UK shoppers might want to order quickly.
But how do Amazon Prime Now’s prices stack up against the major UK supermarkets?
Profitero conducted price analysis of the 49 products available in Prime Now’s Dairy, Chilled and Frozen category on October 5 2015, matched to UK supermarkets carrying the identical products in the same pack-size configuration: Tesco, Sainsbury’s, Asda, Waitrose, Ocado and Morrisons.
In our analysis, we found that Amazon Prime Now was the clear price leader on these 49 products: all six supermarkets were shown to be priced higher than Amazon.
However, while all supermarkets’ prices on these items were higher than Amazon Prime Now, we found that there were varying degrees of price competitiveness between them.
For example, the average product was found to be 45% more expensive on Ocado than on Amazon, while Asda and Morrisons prices were 24% and 30% higher respectively.
Figure 1: Average UK supermarket price vs Amazon Prime Now, October 5 2015
And when we did a deeper dive into the price distribution of UK supermarkets versus Amazon Prime Now, we found that 75% of Ocado’s products were priced higher than the same products sold on Amazon (just 20% of products were priced the same).
By contrast, Asda priced the same as Amazon across 49% of its products.
Figure 2: Price distribution vs Amazon Prime Now, October 5 2015
In summary, it’s still early days for Amazon Prime Now’s foray into fresh groceries but one thing that is certain: price will continue to be a battleground for UK supermarkets, already aggressively competing against the discount grocers.
In order to compete with Amazon, supermarkets need to be closely monitoring price gaps and evaluating which products they want to be price competitive on, as well as looking for non-price hook initiatives to both attract and retain shoppers.