Amazon has been slow to launch its online grocery delivery service in new markets, but there’s hints that one of its next big markets could be London, a city that already has attracted a number of big providers.
The Guardian reports today that Amazon has leased a warehouse in the London suburb of Weybridge, where supermarket store chain Tesco used to operate a distribution center.
Amazon’s decision to launch internationally for the first time is an interesting one since it has been slow to roll out in the U.S. To date, AmazonFresh is only available in New York, San Francisco, and Los Angeles after initially launching in Seattle eight years ago.
But why London?
The big European city is already a highly competitive market, where online shopping has become an established way for consumers to get their groceries. Some of the most well-known players, include Ocado, an online-only UK grocery delivery service founded 15 years ago. Other providers include supermarket chains, including Tesco, Waitrose, and Sainsbury. Additionally, Asda, the second-largest supermarket retailer, also deliveries food to your door and is notable because it is owned by Walmart.
Pricing is also fierce with lots of delivery schemes, offering free shipping on orders over $60 to fees that range from $5 to $10 a month. In the U.S., Amazon has been experimenting with several payment plans, including offering extended free trials for Amazon Prime members. However, it is constantly threatening to charge $299 a year, which on first glance, appears to be way above London’s average price point. As an alternative, Amazon is also offering to charge $7.99 per shipment on orders over $50 for current Amazon Prime members.
How exactly Amazon will compete, or what its offerings will look like, is not clear at this point in time. The Guardian reports that Amazon could launch the service as soon as next month, but details remain murky.
A spokesperson did confirm to the publication that it is leasing two new facilities: the one in Weybridge, and another in Bardon, but would not clarify that the facilities would be used for grocery delivery. The Weybridge warehouse was previously used by Tesco as a grocery distribution center, and right now is being outfitted by a contractor called Clegg Food Projects, the Guardian reports.
One advantage of London’s competitive landscape is that it may be easier to get customers to try the service because of the population’s general awareness of grocery delivery. However, that won’t make the venture any more profitable.
In February, Ocado, the grocery delivery business founded by former Goldman Sachs employees, posted its first annual pre-tax profit, fueled by an increase in online shoppers. To help get it to that point, the company has signed distribution deals with other UK supermarkets, including Morrison and Waitrose. It also has ambitions to enter international markets, by leasing its tech platform to companies in North America, where it is in talks with multiple parties.