Morrisons will supply groceries to Amazon customers in the UK under a new deal with the US online giant. The supermarket said it will supply products for the Amazon Prime Now and Amazon Pantry services.
Amazon Pantry was launched in the UK last year, escalating competition with the big four supermarkets, but did not offer fresh food. Under the new deal, Morrisons will supply fresh, frozen and non-perishable goods to Amazon customers. The expanded Amazon service will be available later this year.
Analysts at Shore Capital said there was “strategic merit” in Morrisons exploring a commercial tie-up with Amazon. Ocado has a 25-year agreement with Morrisons to run the supermarket’s online delivery service. The supermarket also said it will expand the geographical coverage of Morrisons.com by taking space in Ocado’s distribution centre in Erith, southeast London.
However, Morrisons said of the Erith deal: “This amended agreement is subject to detailed terms being agreed and will only proceed if it enables Morrisons to achieve profitable growth online. There can be no certainty that an agreement will be concluded.”
David Potts, chief executive of Morrisons, said: “This is a low risk and capital-light wholesale supply arrangement that demonstrates the opportunity we have to become a broader business. We look forward to working with Amazon to develop and grow this partnership over the coming months.”
Independent retail analyst Nick Bubb commented: “As Morrisons and Ocado seem to be locked in a loveless marriage (much like Waitrose and Ocado), it seems appropriate that they have chosen Leap Day (when by tradition a woman can propose to a man) to announce a strange new agreement, to help them both grow more profitably.
Tim Steiner of Ocado tells us all that ‘this is a win-win arrangement’, but we will have to see whether the two companies eventually end up in the divorce courts.”