Amazon is stepping into the fresh food ring – it might already be too late for the rest to keep up

Nine years ago the then chief executive of Tesco told me his main worry was Amazon entering the fray. Well now it has, and it spells serious trouble for our complacent British supermarkets, writes Chris Blackhurst

Amazon is to expand rapidly into online fresh groceries, with the aim of reaching millions of shoppers across the UK by the end of this year (Getty)

So Phil was right all along. When Philip Clarke became chief executive of Tesco we had dinner. It was 2011 and he’d just taken over from the formidable Sir Terry Leahy. Like his predecessor, Clarke was from Merseyside. But there’s where the similarity stopped. They were opposite in character. Whereas Leahy could be taciturn and inscrutable, the new boss was emotional, fast-talking, non-stop.

Naturally, Clarke was ebullient, chuffed. Who wouldn’t be, after taking over at the helm of Britain’s biggest retailer, the powerhouse of a supermarket chain?

But by the time we’d got to the main course, I discovered Phil’s optimism only went skin-deep. He confessed to worries. Tesco had taken a pasting with expansion in the US; his group faced an increasingly tortuous struggle to be allowed to open more large stores in the UK; the budget operators Aldi and Lidl were making inroads.

Fair enough. But still, Tesco was top dog. Clarke, though, said he had a larger issue, one that loomed far above all the others. This was the threat posed by US tech giant Amazon moving into fresh groceries. I was taken aback at just how afraid he seemed, and at being surprised. It was true, Amazon had begun trialling fresh food in the US but the experiment was in its infancy, confined to one small spot on the west coast. Using its expertise to store and deliver non-perishable good was one thing, but fresh? That was entirely different. There was absolutely no guarantee of success.

Much occurred in those nine years. Clarke’s reign proved to be short and troubled; Aldi and Lidl saw their growth accelerate; Sainsbury’s was revitalised and then proposed merging with Asda to create a genuine competitor.

The Tesco today, however, under Clarke’s replacement, Dave Lewis has recovered and consolidated. It’s managed so far to fend off the cut-price threat; the Sainsbury’s-Asda union has been quashed by the authorities; it’s less bloated, and is a much more efficient, leaner machine. Lewis, also soon to depart, has done a good job.

Now, though, true to Clarke’s forecast, Tesco faces its greatest challenge: Amazon is to expand rapidly into online fresh groceries, with the aim of reaching millions of shoppers across the UK by the end of this year.

At present, Amazon Fresh offers same or next-day groceries to customers in London and parts of the Home Counties. They must subscribe to Amazon Prime to access the service and then pay extra to receive food deliveries. From next Tuesday, they will suffer no additional charge if they spend above £40. Availability is also going to improve, with shoppers in some postcodes able to receive a delivery before midnight that day, even if they order as late as 9pm.

Suddenly, Clarke’s dread is very real. Tesco should be scared. Not only Tesco, but all the UK groceries sector. Amazon already has a product range of 10,000 items of fresh, chilled and frozen foods. The online deliverer can access the know-how and might of Whole Foods, the upmarket store chain it owns. If Amazon loses money setting up the UK fresh supply chain and delivery system, no matter – those costs can be absorbed. From the go, Amazon Fresh can draw upon the existing, and growing, Amazon Prime UK subscriber-base of a whopping 15 million people.

Focused on chasing each other for marginal gains here and there, they should have been assembling a world-beating fresh food online operation

This is no ordinary entrant, not a novice that can be seen off with muscular price cuts and sustained advertising. It’s a giant that aims to crush the opposition and only has one result in its sights: total market domination.

There are arguments that say Amazon will struggle to build brand awareness in the UK in fresh food, that our grocery names are entrenched and hard to dislodge. But we regularly receive regular deliveries from Amazon of household staples. At the beginning of the lockdown, when the old-fashioned bricks-and-mortar shops ran out of toilet rolls we ordered ours on Amazon and they duly arrived. There was no fuss, no angst, no need to queue.

Working from home I can’t fail but notice the brown boxes that arrive almost daily, frequently ordered only a few hours previously and containing the most mundane of products – the other day what I thought would be a pair of trainers turned out to be tubes of toothpaste and bottles of mouthwash. Making the transition to actual fresh food should not prove so difficult.

At first, the main battleground will be at the top end. Prime, which requires a subscription, is positioned upmarket, from the rest of Amazon. In anticipation, the company has struck deals with small, independent producers of the sort that will appeal to the target audience, and it has that Whole Foods connection. M&S, about to begin its own partnership with online deliverer Ocado, be warned. Waitrose, too, which has seen Ocado jump to M&S, appears vulnerable.

Even without Amazon’s news our residential streets were heading for a terrific scrap this autumn, of M&S with Ocado vans vying with those from the newly-alone Waitrose, not to mention Asda, Tesco and Sainsbury’s. Now, however, a monster has climbed into the ring, a fighter that gives no quarter.

Back to that evening with Clarke. I remember trying to assuage his concerns, and failing.

Clearly, his clever analysts at head office had crunched the numbers and they did not look good: if the US trial worked, Amazon, they could see, had the potential to sweep all before it.

Plenty did take place in UK supermarkets in those intervening years. Unfortunately, something did not, which was UK companies gearing up for the coming invasion.

Too busy sorting out their own internal issues, focused on chasing each other for marginal gains here and there, they should have been assembling a world-beating fresh food online operation. It’s a bit late now.