Morrisons will provide a wholesale supply service to Amazon, allowing Amazon’s customers access to a wide range of Morrisons ambient, fresh and frozen products.
Morrisons have also agreed in principle with Ocado for Morrisons to take space in Ocado’s new Customer Fulfilment Centre in Erith, and Ocado delivering a store pick solution for Morrisons. This will enable Morrisons to serve the whole of the UK, including importantly the North and Scotland where Morrisons traditionally has a stronger physical store presence.
What’s interesting about the Amazon deal is that Morrisons may not make super high margins, especially bearing in mind that supermarkets traditionally have high turnover and low margins. For instance a box of 12 Whiskers cat food sachets retails at Morrisons for £3.00 (reduced on special offer from £3.67) . The same product is available on Amazon Pantry for just £2.50 and that’s not a special deal.
Of course Morrisons isn’t likely to the the only supplier to Amazon Pantry so won’t have to slash their prices on everything and certainly won’t have to compete on their own brand products. We know how Amazon operate however with their obsession in delivering value to consumers and even if price matching Morrisons with Amazon Pantry, Amazon will likely be taking a commission.
If however Morrisons customers start shopping on Amazon for Morrisons own brand products and discover that brands such as Whiskers are cheaper on Amazon, will they ever go back to purchase on Morrisons.com or will they just stick with Amazon Pantry?
Realistically however Morrisons don’t have a lot to lose. They are the last of the major supermarkets to sell online with home delivery and if Amazon propels their sales upwards it can only be good for the company, even if margins are razor thin. More importantly the deal will send a shot across the bow to the larger supermarkets that Amazon are serious about growing Amazon Pantry and that Amazon intend to be a serious contender in the online food delivery business.