Amazon Fresh Undercuts Supermarkets By 10–20 Percent

Amazon’s acquisition of Whole Foods in the US has fired the starting gun on a concerted push into food retailing. In the UK, Amazon Fresh has been operating for a few years and is showing a strong growth trajectory. Now is the time for supermarkets to look at how they measure up, particularly on price.

On 3 and 4 January 2018, we price-checked a cross section of 50 products across Amazon Fresh, Ocado, Tesco, Morrisons, and Sainsburys. The results are dramatic: Amazon Fresh is at least 10 percent cheaper than the competition, even when special offers are included.

Looking only at headline prices, excluding promotions, the price gaps widens substantially to 15–23 percent.

Such price gaps are hugely significant in an industry where competition is tight and margins very thin. If Amazon Fresh can maintain these prices it will represent a huge challenge to the rest of the sector as it grows. 

Of course, the gap could be part of a temporary price test by Amazon Fresh, or they may be running with unsustainably sharp pricing to attract customers during the early stages of their rollout. 

The prices are only available to Amazon Prime customers who have also signed up to Amazon Fresh at £6.99 per month. Although for this they also get free delivery on shops over £40. 

In food and other categories, Amazon regularly tests and changes prices. The other supermarkets may also react to the headlines this research generated. We will track changes over time to see what happens next – to attempt to figure out what Amazon is really up to and how incumbents under pressure may be able to respond.

For further retail insights, read Nick Harrison’s blog