More misery for Tesco? Amazon and Google could be the next big players in the UK's supermarket wars

The internet giants are squaring up in the US online grocery market, but it could be Tesco and its supermarkets rivals in tears when they come to the UK.

by Rachel Savage
Last Updated: 18 Feb 2016

Britain’s established supermarkets, especially Tesco and Morrisons, have been suffering for a few months under an onslaught from discounters Aldi and Lidl and consumers shifting shopping from out of town superstores to convenience stores and online.

And it could be about to get a whole lot more miserable: internet giants Amazon and Google are currently expanding online grocery offerings in the US and have made no secret of the depth of their pockets and the size of their ambitions.
AmazonFresh (an eery echo of Tesco's failed US chain Fresh'n'Easy?) has been trialled in the company’s home city of Seattle for the last six years, and the service has just expanded to areas of San Francisco (surprise, surprise) and LA. The service, which you have to be a $299-a-year (£175) member of Amazon Prime to use, delivers some food from local stores, but most come from the company's own refrigerated warehouses.
If it goes down well in California, AmazonFresh will expand to 20 other cities, including some outside the US, an anonymous source told Reuters last year. Although online sales are still just 4% of the UK grocery market, that was still worth £7.7bn in 2014, so it wouldn’t be surprising if British cities are top of Amazon’s hitlist.
There also some, ahem, issues with AmazonFresh. As New York Times tech columnist Farhad Manjoo wrote last year (get out the tissues everyone): ‘While AmazonFresh’s selection is large, it doesn’t include everything I can find within a 10-minute drive from my house. It doesn’t carry curry leaves. It doesn’t have whole fish. It doesn’t have gluten-free cornbread mix, fresh-roasted coffee beans, or the world’s best coconut water.’ The heart bleeds.
Google, meanwhile, is slowly but surely rolling out Google Shopping Express. Still just in parts of San Francisco (again…), LA and New York, Google vehicles deliver non-perishable groceries, toilet paper and the like from local retailers big and small. The big idea is to make friends with retailers rather than competing with them, in order to get people searching for products on Google rather than going straight to Amazon.
The search leviathan has set aside as much as $500m to expand the service across the States, a source told tech site Recode. Given how much cash it has in Europe that it would rather not move back across the Atlantic and pay a ton of tax on, the UK could very well be next.
The US and UK grocery markets are different for one obvious reason: the sheer vastness of America. It means superstores are going nowhere fast Stateside and online deliveries can’t viably reach much of the population without huge investment. That means web shopping is more developed, and so potentially harder to break into, in the UK: 48% of Brits shopped online in 2013 compared to just 16% of Americans, according to researchers Mintel.  
But with billions at their disposal and a track record of shaking things up, MT wouldn’t bet against Google and Amazon bringing their veg wars to Britain sooner rather than later.

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