Amazon's deal with the British supermarket chain, Morrisons, bothers Ocado.
Amazon has entered the British fresh food market. A wholesale supply agreement is signed by the online ecommerce company with UK supermarket Morrisons that will add to the American organization’s food offering in the country with frozen and fresh items.
The fourth largest supermarket in Britain, Morrisons stated on February 29, 2016 that the agreement would allow a large number of Morrisons products to be offered to Amazon Pantry and Prime Now customers in the upcoming months. These include frozen, fresh and others. In 2015, Amazon Pantry was launched in UK, which escalated rivalry with four huge supermarkets, but did not provide fresh food items.
According to BBC reports, Morrisons and Ocado have signed a 25-year contract, the companies to run the online delivery facility of the supermarket. The contract will warn the huge online grocery sellers that the Seattle-based organization wants to earn money from British online grocery market.
Amazon Pantry is comparatively a small fresh food delivery service provider, but this partnership with the British organization provides a much stronger footprint to Amazon. Morrisons, which entered the online delivery industry late, can’t lose much from the agreement as it has only captured 3% of the market, but will threaten leading supermarket, Tesco.
The newly signed contract would also provide Morrisons a significant new channel to facilitate its food business. It will further sour the relations between Ocado and the Bradford-based company.
CEO of Morrisons, Davis Potts, is not happy with the agreement signed by Dalton Phillips who previously used to serve at his position because the network of Ocado does not serve important areas like the heartland of the supermarket, Scotland and the North of England.
Ocado is comforted by Morrisons decision to use the capacity of its new “fulfillment center" in Erith, located in Southeast London. Morrisons is trying to catch up with Amazon, after waiting up till January 2014, the organization was able to offer an entire online buying service. David is continuously focusing on the core business of the company – supermarkets – to revive the fortunes of the supermarket chain, but said on February 26, 2016 that the partnership with the e-commerce company was an "opportunity to build a broader business”. He said, “Today's agreement is built on Morrisons unique strengths as a food maker.”
Morrisons suggests the measure was taken as a part of its six priorities to ensure that its supermarket chains become strong again while establishing an extensive business complimenting their current supermarket chains.
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