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Why Amazon Is Expanding Its Grocery Delivery in the UK

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Online grocery to drive e-commerce sales

Amazon (AMZN) announced the expansion of its fresh food delivery service in the UK (EWU). The strategic move comes at a time when the adoption rate for fresh online grocery products is expected to rise around the world, as can be seen in the chart below.

According to Morgan Stanley Research, “More than a third of online shoppers expect to buy groceries over the Internet in 2016 – 34% vs. 21% in 2015.”

This number does looks optimistic at first glance, but the majority of shoppers still prefer to buy groceries in a store. However, quick delivery, low prices, and enhanced offerings could well accelerate the online grocery adoption among shoppers.

According to Ajay Kavan, vice president of Amazon Fresh, “Amazon will be offering one-hour delivery slots to 69 postcodes in London with same-day delivery offered on orders placed before 1 pm.” Moreover, select items will be sold at comparatively lower prices.

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Competition to heat up in the industry

Amazon isn’t new to online grocery retailing. The company already offers its AmazonFresh service for delivering groceries in select cities in the United States. However, its service has negligible business compared to some of the big players operating in this space.

In the UK, large retailers such as Tesco are already reeling under pressure from deep discounters like Aldi. Now, with Amazon ramping up its fresh food delivery service into this already-crowded market, could further heat up the competition among grocery retailers.

In somewhat similar move, Walmart (WMT), Alibaba (BABA), and Google (GOOG) are some of the major companies that have invested in expanding their services to include the same-day delivery of fresh groceries and food.

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