Same-day delivery in the UK
Amazon (AMZN) will now offer perishable items such as butter and cheese with its same-day delivery service in the UK. The UK media has been speculating for quite some time about Amazon’s plans to launch an online grocery service that will include fresh food.
The recent move of offering perishable items indicates the company’s plans of launching its service Amazon Fresh in the UK.
According to a report from Statista, Tesco has the majority share in the grocery market in the UK. Tesco (TSCDY) has a market share of 28.5%, followed by Asda’s 16.4% market share.
The entry of Amazon into the UK’s fresh food market should place Amazon in competition with grocery stores such as Aldi and Lidl, which offer attractive discounts and home delivery service.
Amazon’s operating margins from International segment
The increased investments in the UK and other international markets impacted Amazon’s operating margins up to 5.1% in 2Q15. However, the operating margins for Amazon’s International segment have remained in the negative over the last few quarters, as shown in the above chart.
The primary reason for the poor performance in the International market is the strong US dollar, which shaved 7% from Amazon’s revenue growth in the last quarter. Secondly, the company is looking to double down on its investment in the Indian e-commerce market because of the potential that this market possesses.
Amazon plans to double its investment in India
Last year, Amazon announced that it will invest $2 billion in the Indian e-commerce market. Amazon could increase its investment there to $5 billion over the next few years, according to a report from The Economic Times. This would make India (EPI) Amazon’s largest market outside the United States.
Alibaba (BABA), the largest e-commerce player in China, has also increased its investment in India. Alibaba has reportedly raised its stake in the Indian e-commerce player Paytm.
Currently, the Indian e-commerce market is led by local players Flipkart and Snapdeal, with eBay (EBAY) also trying to gain market share. With the rapid growth potential of the Indian e-commerce market, Amazon and Alibaba are both trying to provide stiff competition for these players.