Amazon Strengthens Ties With Morrison Presenting Fresh Concerns For Ocado

(qlmbusinessnews.com via bloomberg.com – – Wed, 16 Nov, 2016) London, Uk – –

Amazon Online Retailer
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 Amazon.com Inc. extended its British tie-up with Wm Morrison Supermarkets Plc, presenting a fresh concern for Ocado Group Plc as competition mounts for the U.K. online grocer.

Members of Amazon’s Prime service in parts of London and southeast England will soon be able to order from an expanded range of Morrison grocery products for delivery in as little as an hour. The regions being targeted are right on Ocado’s doorstep and will add to tensions between the supermarket chain and the online grocer only three months after they extended their own partnership. Ocado shares fell as much as 6.8 percent.

“Morrisons is completely cutting out Ocado in this new offer,” Andrew Gwynn, an analyst at Exane BNP Paribas, said in a note. Products for the new service will be picked from Morrison supermarkets and delivered by Amazon.

By strengthening ties with Amazon, Morrison is straining relations with the company that it partnered with to belatedly enter the online grocery market in 2013. Mounting competition is taking a toll on Ocado, which said in September that profits will likely fall below analysts’ estimates. The online grocer is also struggling in its efforts to license its warehousing technology to international retailers.

Ocado has been assured by Morrison that the supermarket “acknowledges and respects the exclusivity provisions in our agreement,” Ocado said by e-mail. These oblige Morrison to operate its own online grocery service within the confines of the partnership.

Ocado shares fell 6.1 percent to 265 pence at 9:58 a.m. in London. The stock is down 13 percent this year, headed for a third straight annual decline. Morrison shares rose as much as 1.4 percent.

The new agreement between Morrison and Amazon means Prime customers can now choose from a range of several thousand Morrison products compared with less than 1,000 previously. They will pay 6.99 pounds for a one-hour delivery slot and won’t be charged for groceries delivered within a two-hour window. Amazon has full control over the prices it charges for Morrison products.

Amazon’s move further underlines its intention to take on Britain’s supermarkets and the looming threat is causing incumbents to raise their game. J Sainsbury Plc, which is also concentrated in London and the south east of England, began trialing a one-hour delivery service in southwest London in September.

By Paul Jarvis and Sam Chambers