In technology, while it isn't everything, timing matters in determining winners and losers.
Case in point: Online grocery delivery services drew significant attention and raised hoards of venture capital during the original tech bubble, only to flame out spectacularly as the original tech bubble burst.
Fast-forward to today. The start of 2016 has ushered in a renewed interest in grocery delivery among both technology and retail powers, including Amazon.com (NASDAQ:AMZN), Alphabet, and Whole Foods. And amid this rekindled interest in a truly challenging business, it should come as no surprise that e-commerce competitor extraordinaire Amazon.com is the firm accelerating the pace of competition, as evidenced by one recent move.
Amazon Fresh enters The U.K.
According to recent announcements, Amazon has agreed to bring its Prime Fresh and Amazon Pantry services to the U.K. via a partnership with British grocer WM Morrison Supermarkets PLC (OTC:MRWS.Y). Amazon's expansion news was widely expected, and comes as the e-commerce giant takes steps to magnify the footprint of its same-day delivery services across the country.
Last fall, Amazon expanded its same-day delivery services in the U.K. to include limited perishable items like butter and cheese. Now, with WM Morrison Supermarkets serving as its wholesale distribution partner, Amazon will expand its Prime Now one-hour delivery service to include over 15,000 items, though it will still only operate in major population centers -- London, Birmingham, Newcastle, Manchester, and Liverpool. An entirely separate service, Amazon Pantry is available across the entire U.K. but features a smaller selection of roughly 5,000 non-perishables like cereal, soap, and diapers, to name a few items.
Sign of the times
For those who are not aware, the U.K. grocery delivery market today is far more developed than that of the U.S. According to a study by British nonprofit Institute of Grocery Distribution, 27% of British shoppers reported using online grocery services to handle their grocery shopping each month. The nonprofit also estimates that online grocery delivery revenues will effectively double to $23.9 billion by 2020. As such, Amazon's interest in this market should surprise precisely no one, as it exemplifies the broader, more substantive maneuvering the company has undertaken to dominate what should eventually become a substantially larger segment of retail grocery sales.
Though it involves thinking on a truly massive and long-term scale, arguably the best way to understand Amazon is as a vertically integrated retailer that owns as significant a share of the global distribution network as it can profitably control. Recently, details of Amazon's internal plan to potentially create its own global logistics service connecting manufacturers in Asia to consumers worldwide emerged. Such an undertaking would require years of painstaking investment on its part, but as the company that prides itself on long-term planning, such a sweeping endeavor is arguably the safest route to dominating the generational rise of global e-commerce, which remains very much in its infancy today.
The expansion of grocery delivery into the U.K. certainly won't move the needle to a meaningful degree for a $100 billion revenue colossus like Amazon. However, the firm's decision to expand its grocery delivery service internationally again speaks to its broader long-term intentions to capture as much e-commerce market share as it possibly can.