Amazon set to sell groceries
Ocado’s £1.1bn float was dealt another blow yesterday when internet giant Amazon launched a competing grocery delivery business.
Amazon has long toyed with the idea of branching into food delivery, and already does so in the US and Germany, but the timing of the decision heaps pressure on Ocado.
Analysts have already questioned the value of its IPO, mainly due to Ocado’s reliance on supplier Waitrose, which has a competing delivery service.
Amazon said it is “early days” and it is unlikely to immediately break into the “big four” grocery delivery firms – Tesco, Asda, Sainsbury’s and Ocado – as many of its items are currently only sold in bulk.
However, its service is a warning shot to competitors that the home delivery market is hotting up, especially as Amazon will sell 22,000 products, compared to Ocado’s 20,000.
Amazon’s grocery division is set to offer cash-and-carry style goods, such as a £120 whole lamb carcass, and differs from Ocado in that third party suppliers will deliver items such as fresh and chilled food.
Verdict analyst Joe Robinson said: “Ocado has a significant competitive advantage over Amazon, owing largely to its innovative and efficient fulfilment operations, customer loyalty and quality credentials.”
Ocado’s roadshow began on Tuesday, as it called on investors to snap up £200m worth of new shares.